Monzo, the challenger bank, is leading a pack of second and third generation tech start-ups expanding their office take-up in central London.
The online banking disruptor is tripling its London take-up in just one year, having agreed to sublease 40,000 sq ft from Bloomberg at 38 Finsbury Square, EC2.
It will move from its current office at 230 City Road, EC1, where it currently occupies 13,000 sq ft. Monzo has agreed to take a two-year lease, paying circa £34 per sq ft at its new HQ, which was occupied by Bloomberg before it moved to its new purpose-built HQ at 3 Queen Victoria Street, EC4, at the end of last year.
The deal is the latest in a series of maturing tech companies which are rapidly expanding their London footprint (see table).
London’s tech venture capital investment reached an all-time high of just under £3bn in 2017 – four times more than Paris, the nearest European rival.
Research by data firm Pitchbook for lobby group London & Partners found the UK’s tech firms, dominated by London, gained more venture capital investment in total than Germany, France, Spain and Ireland combined.
“Tech funding of London firms has actually accelerated since the EU Referendum and we think the likes of second wave technology companies – Artificial Intelligence, robotics, and autonomous vehicles – are really going to come to the fore,” says Abby Brown, partner in Knight Frank’s central London leasing team.
While they have traditionally been clustered in the Tech Belt around Shoreditch and Clerkenwell, Monzo’s move to the City is part of a trend of tech companies becoming increasingly footloose.
“It’s property, not location, that is the key factor, which is why they’ll consider from Chiswick to Canary,” Brown says. “And with Crossrail finally becoming a reality this year, connectivity is about to get even easier.” Non-core locations which deliver the right product, such as White City, Stratford and Nine Elms, are expected to come into their own.
City TMT active demand currently totals 1.1m sq ft, equating to a 20% share, according to JLL. City TMT take-up in 2017 totalled 1.6m sq ft, equating to a 26% share.
“We have definitely seen more TMT occupiers heading east towards the City,” says Dan Burn, director, City office agency at JLL. “We’ve seen some really good occupiers [like Deliveroo, Mimecast, and Photobox last year] eat into the market and I think that will continue.
“They tend to use flexible workspace at first and then shift out as they grow very quickly. Just look at what Facebook has done. It’s evident that the rate of growth is far exceeding what we had thought originally.”
Where will they go next? “That is the big question,” says Burn. Google, Apple, Amazon and Facebook all established themselves in London in the last 10 years taking small offices before exploding onto the market with 500,000 sq ft to 1m sq ft campuses in King’s Cross, Battersea, Midtown and the City fringe.
Bill Benton, executive managing director, Newmark Knight Frank (US), says it’s a case of “build it and they will come”. “When I show a tenant fitted out space they want to blow out competitors and ask, can we get a term sheet to them [the landlord] today?
“When a tenant sees this space and realise they don’t have to go through any of this [fit out], they don’t even care about the money at this point, the rent is whatever you tell them it’s going to be because they need that space right away.”
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