London's thriving tech sector has helped to drive a resurgence in building activity in the City over the past six months as developers push the start button on a record number of schemes in areas such as Old Street.
Developers kick-started work on 10 new schemes in the City in the six months from April to October, totalling 1.6m square feet, according to the latest Deloitte London Office Crane Survey out today.
This marks the biggest number of new starts since 2011 and a huge jump on the previous six months, when there was only one. It is also the sharpest rise across all of central London, accounting for three-quarters of new space being built in the capital.
Of the 10 new starts, five are located on the fringes of the City near Old Street’s so-called Silicon Roundabout – also coined Tech City – and include Derwent London’s huge White Collar Factory office building and Helical Bar’s The Bower.
The other three developments include 99 Clifton Street in Shoreditch, which was forward sold last month by Helical Bar to UBS Triton Property Fund, and Maple House on City Road, also owned by Helical Bar.
The biggest construction start is One London Wall Place, which spans 309,000 square feet and is owned by Brookfield Office Properties.
“The market is reacting positively to demand and London is at the forefront in terms of development. A lot of the space under construction has already been let, which shows a positive market. The financial sector has been dominant in terms of taking space, but going forward TMT [tech, media and telecommunications] is very important,” Steve Johns, Deloitte’s head of City leasing, told City A.M.
The growing tech sector and government initiatives to market the east London area as a home for start-ups has prompted developers to tap into a need for supply of new office space.
TMT businesses now represent 16 per cent of total office space across central London, an increase of 18 per cent in 10 years. While financial services firms accounted for 32 per cent of space let over the past six months, tech firms were the second most active market, taking up 24 per cent of office space on the market.
The construction boom comes amid growing investment activity in the tech sector. Recent figures from the Mayor’s promotions agency, London & Partners, showed London tech firms attracted a record $1bn (£626m) of venture capital investment in the first nine months of 2014.
London money transfer startup Transferwise said yesterday it was on track to raise $50m from US venture capital firm Sequoia Capital, in a deal that values the firm at nearly $1bn.
“For anyone in Europe who wants to start a fintech venture, it has to be based in London,” Berenberg analyst Ali Farid Khwaja told City A.M. “Really everyone is looking to London for fintech. Silicon valley firms are not fit to serve the needs of banks of Wall Street, as there’s quite a culture clash between them. But because of London being a financial centre, it’s a much better fit.”
Yet Khwaja warned that London’s tech scene is not without rivals elsewhere in Europe: “Germany has the hubs for social networking media, Sweden more for gadget and hardware, and France for semiconductors.”