By Maxine Kennedy, Researcher in the City of London Research Team
The tech sector identifies the City of London as having all the ingredients for startup success – talent, capital, superb infrastructure and potential for partnerships with larger corporates – according to a new research report launched at MIPIM, the world’s largest property convention.
Commissioned by the City of London Corporation and the City Property Association, in association with Cushman and Wakefield and KPMG, the research aimed to find out whether the City is still attractive to cutting-edge businesses – is it the place to be for fast-growing tech, and if not, why not?
This is an important time to be asking this question: tech jobs now make up approximately 8% of the City’s workforce, and the City is one of the few London boroughs to have seen year-on-year growth in the number of startups. The growth of AI and automation is likely to affect traditional City sectors, namely financial and professional services.
Interviews were carried out with landlords, large corporates, the tech sector and other interested parties and focused on startups in the fintech, legaltech and insurtech spheres.
For me, three interesting themes came out of the research:
- There remains a misperception about the cost of being located in the City. Some firms interviewed for this study view the City as a traditional and expensive location, yet firms were surprised at the relative cost of renting here. Property owners were quick to point out that for every modern high-rise and listed building, there are other offices that offer a better fit in terms of size or budget. City rents are generally lower than in Paddington, Marylebone and Mayfair, and on par with others such as Southbank and Shoreditch.
- As well as office space at a suitable cost, what startups really need is flexible leases that allow them to scale. Co-working spaces, such as WeWork are growing rapidly, reflecting the demand for this type of space. WeWork alone accounted for 342,450 sq ft across 6 deals in the City in 2016 and 546,549 sq ft across 7 deals in 2015, making them the tenant who acquired the most space in the City in both 2016 and 2015. Yet, there are only a handful of new entrants and the feeling is that demand is still outstripping supply. The research found that just under half of those in accelerator or incubator spaces are in a co-working or shared working space. A further 20% are located within parent organisations - showing how few are in traditional leased space.
- The City’s built environment was highlighted as a key draw, especially in terms of its many transport links but there was a feeling that the perception of the City could become more aligned with tech if there were more independent and pop up shops and street vendors. Promoting the many hidden green spaces such as churchyards was also as a way to make the City more appealing to the start-up culture. Placemaking, therefore, is increasingly becoming integral to a competitive offer.
Overall, interviewees felt that by promoting emerging technology startups the City would ultimately benefit from being at the centre stage of advances in innovation.
These findings echo those of a report we released last year, which found that SMEs and startups in the City really value flexible space to support their growing business. The research also highlighted that small businesses believe that being located in the City helps them to attract the best talent.