London's burgeoning tech sector is taking an increasingly large slice of prime City office space, with fast-growing companies favouring the Square Mile over the so-called Silicon Roundabout.
Tech firms have committed to almost three times as much office space in the City compared to the City fringe, which includes areas like Shoreditch and South Bank, in the first quarter of the year – according to research from real estate adviser Savills.
The analysis also showed that tech take-up in the City (both core and fringe sub-markets) last year was up 65 per cent on the 10-year average - the highest level of take-up seen in the city by tech companies since 2000.
In the first three months of 2018, take-up by tech occupiers in the City hit 114,843 square feet (sq ft), already over half the total tech take-up seen in the area in 2017. By comparison, tech take-up in the City fringe in the first quarter of 2018 was at 42,473 sq ft.
The news comes as co-working space giant WeWork, which counts many tech startups as its clients, announced yesterday that it has snapped up the City of London's Devonshire Square for around £580m.
Key examples of other tech companies setting up shop in the City include cloud-based email management company Mimecast signing a lease on to 78,629 sq ft space at 1 Finsbury Avenue and data protection firm CallSign agreeing to a new lease on a 13,443 sq ft property at 150 Cheapside.
“Where we have historically seen the majority of tech occupiers opt for fringe locations, there has been a notable shift in 2018 driven by a lack of supply in these areas,” said Paul Bennett, director of Savills' central London office.
“Tech firms with large operations require buildings that will support their staff and business, and we are seeing landlords in the City core re-position their buildings to cater for these tenants.”
Meanwhile, according to real estate group CBRE the first quarter of 2018 saw the highest quarterly take-up by tech companies in the City since early 2014.
“Silicon Roundabout remains one of the pre-eminent destinations for technology companies settling in London," said Simon Calvert, senior director at CBRE. "However, driven partly by availability, we are seeing more tech companies move away from the ‘brick and beam’ style buildings and towards the City, taking up space in more traditional buildings."
Stuart Melrose, head of occupier advisory at Colliers, said small tech firms now struggle getting office space near Silicon Roundabout because the cost is going up "dramatically" in those areas.
Meanwhile Ben Mein, CEO of property search firm Harness Property Intelligence, pointed to the many advantages of the City itself: "A change in working habits and emergence of flexible offices in the City and surrounding areas, which boasts transport and amenity benefits from being at the heart of the capital’s financial engine, has seen a host of tech companies migrate there.”