London: UK property
A diverse occupier base will continue to fortify the City market in 2018
The success of the City market over the past ten years has hinged on its ability to diversify its occupier base and its amenity provision.
The rise of Old Street and Shoreditch markets, otherwise known as the ‘Tech Belt’, has been instrumental in this change, by attracting companies of all sizes from digital start-ups to large Media Tech giants. This in turn has attracted a diverse food scene and niche retailers.
The City core continues to attract the world’s largest banks and financial institutions, attracted by London’s intricate financial ecosystem and fantastic transport links. With the emphasis this year on Brexit negotiations, will the City be able to retain its status as one of the world’s leading financial centres and technology hubs?
The Banking and Finance sector will be paying close attention to negotiations concerning access to European financial markets this year. Arguably the City core, with its exposure to jobs within this sector, could be adversely affected. However, estimates suggest that the number of jobs relocating to other European cities has largely reduced. Major banks have, in fact, expressed their commitment to the City; Deutsche Bank’s half a million sq ft pre-let at 21 Moorfields and Goldman Sachs’ nearing completion on its 800,000 sq ft HQ.
Bucking the trend of banks announcing plans to relocate out of the capital, Spanish bank Alantra Partners are considering moving their headquarters to London from Madrid, a major vote of confidence for London.
The City is equally reliant on Media Tech occupiers to drive demand; indeed the sector took an 18% share of take-up last year, equal to financial services. Although this is concentrated around the ‘Tech Belt’, the City core has seen an uptick of Media Tech demand due to the combination of its improving amenity offer and the increasingly attractive value proposition – indeed, rents in the two sub-markets stand in the mid to high £60’s.
So how well shielded is the City’s Media Tech sector from potential Brexit shocks? According to the latest Tech City UK report, London continues to attract the majority of digital tech investment reaching £2.2bn in 2016, £1bn more than Amsterdam and Paris. Furthermore, the Financial Times’ latest 1,000 fastest growing companies ranks London as the number one city with the largest proportion of high growth companies in Europe – 44% of these are Media Tech companies including fintech, cyber security and media firms. This underpins our view that the Media Tech industry will be at the forefront of driving employment growth in the City over the next five years.
The arrival of Crossrail later this year will open up submarkets like Whitechapel to occupiers priced out of the core and fringe, and will also improve connectivity across the City. Continued improvement in F&B and retail offerings will also help to attract occupiers. The regeneration of Old Street roundabout will include new cycle lanes, significant public realm improvement and pop up shops. Similarly, but on the opposite side of the City is the Bloomberg Arcade, which arrived in 2017 further improving the food offer and sense of place in the core.
Central London Office Research
A version of this article was first published in New London Quarterly.