With tech take-up showing signs of slowing, a new front-runner has emerged in the race for space in the City. Nadia Elghamry explores which sector has taken over from TMT
Move over TMT, you’ve had a good run but it looks like your time as the darling of the property world is coming to an end. The new winner of the London space race is finance.
Which is ironic considering this year has been labelled the tipping point for TMT. In 2015 more than 1bn wireless devices will be shipped worldwide, up by 60% from 2014, according to Deloitte’s TMT predictions.
That doesn’t look like it will translate into sq ft.
Over the last five years TMT has in real terms been one of the fastest-growing occupiers in London. Compared to 2009 its take-up last year more than doubled, equating to 2.3m sq ft according to data from EGi Research.
But there are signs that meteoric growth is slowing and in the past year it has become one of the fastest shrinking sectors, signing for 930,000 sq ft less than in 2013, a 19% drop.
The banks, battling with extra legislation and worries over tech security, have taken on people and with it space and are now the largest occupier in London’s core. The amount of
space taken by the finance sector grew by 870,000 sq ft last year, up more than 40% almost back to levels of take up seen in 2009.
But while finance occupiers might rule the roost in the core markets, in London overall its influence in the occupier market has waned as overall take-up levels in London have risen. Five years ago finance accounted for nearly a third of all space signed for, last year it accounted for a fifth.
In the fringe, space signed over the last year has risen by 20% but it was not the tech companies driving the increases. Space signed for by TMT occupiers in the fringe markets flatlined last year compared to 12 months ago with insurance, financial and property developers and agents pushing up totals.
Core v fringe: what does it mean for tenants?
Dion Panambalana, partner at Hogan Lovells International, considers the best areas for occupiers to connect to their clients, particularly in a world with an increasingly mobile workforce
When it comes to what central v outer London locations actually mean for occupiers, there are a number of factors to consider.
Is it all to do with price? Should we assume that core is City and therefore that is where the more expensive properties are located? Perhaps not. After all, areas which were considered fringe 20 years ago are now key destination workplaces. Think King’s Cross, Farringdon, Soho, South Bank. Gone are the days when the majority of our work as property lawyers was focused on major corporates, banks and insurance companies clustered, coffee-house style, in the City core.
Then there is another question around where occupiers are likely to head for their clients. Because these days, in such a digital world, is that not everywhere?
The answer is yes to a degree. But everything, for now at least, still feeds back to a base. A bricks and mortar office/meeting place/hub – whatever you want to call it. And this is where investors would do well to try to think like an occupier. Because where key tenants want to be is where investment is more likely to produce the right returns.
The final consideration eliminates the core v fringe argument entirely as it applies to properties across the whole of London: transport links. And this is not restricted to the Amazons and Googles of this world. Lawyers, bankers, financial services professionals are, at least, smart thinkers. And the younger workforce and talent is more mobile than it ever has been before – even at traditional occupiers.
So being near a Crossrail station, a major London rail terminus or a nodal Underground station helps. And don’t underestimate how far good cycling (and showering) facilities for the increasing numbers of staff who commute on two wheels will enhance your offer.
