Residents in San Francisco have fallen out of love with the tech sector. They blame its success for driving up house prices and rents. Tensions are rising amid claims of a gentrification led by tech workers.
Yet right now, London is in love with tech. Google has committed to King’s Cross, while around Silicon Roundabout developers are hurriedly adding funky offices to meet demand. The former media centre at the Olympic Park is being transformed into the Here East tech hub, while Facebook has just signed a lease on a 227,000sqft office in Rathbone Square, for occupation in a couple of years from now.
The positive news for employment and the London economy brings with it further demands on London’s housing market. So is the tech influx spiking home prices?
Research by agent Stirling Ackroyd reveals the real tech hotspots of London, with areas ranked by density of tech businesses. Unsurprisingly in the capital, Silicon Roundabout ranks number one, with the EC1V postal area squeezing 3,228 firms into a square km. In second place is neighbouring EC2A.
Elsewhere, the W1 postcodes show a second cluster, albeit more spread between Marylebone High Street and Charlotte Street – the area Facebook pitches into. Here, the study found a tech density of 1,214 businesses per square km. But the concentration of businesses has not fed through into a similar spike in residential demand, mostly down to how bloody expensive it already is.
In reality, the cliché of techies living close to where they work doesn’t happen, says Alexander Jones of Stirling Ackroyd. “I think the dream is, they all want to do that – what is unfortunately true is that flats are very expensive. The big drivers for tenants are price and getting to work.” And Canan Wood, who handles corporate relocations at Hamptons International, adds: “It isn’t one size fits all, and the tech workers are not all your typical mid 20s grads.” As a result, London’s real world housing market is a much more mixed up affair, with no specific areas colonised by a single type of worker.
In Shoreditch, Jones says it is demand from the finance sector that drives the market, with 30 per cent of renters from that sector; in contrast, just 21 per cent come from the tech, media and telecoms sectors. “It’s not a low end market,” he adds, with his Shoreditch tenants having an average salary of £64,000. “At the top end, prices are still being driven by the City.” That pushes those earning lower amounts out to cheaper areas, such as Dalston, Hackney Central and, in search of value, Stratford.
In the West End, where Facebook’s techies will soon arrive, flats are far more expensive than the East, with commuting more likely to be the case. Hamptons points to Islington as a popular place to live for those working in the social media companies of the West End.
For those higher up the tech ladder who are paid handsomely, frequently it is education that drives decisions. They’re often older with families, so Ealing often wins the vote, due to its good schools.
So while tech startups may be flavour of the month, they are not driving the capital’s housing market in any meaningful way. House prices and rents in the capital may be sky high, but the app developers are suffering along with everyone else.