Shoreditch was once touted as London’s answer to Silicon Valley, but what has happened to it over the past 15 years? And is it still the center of London’s tech scene?
It’s been 15 years since the phenomenon of small high-tech companies concentrating around the Old Street Rotary first began to catch the attention of the real estate industry. In 2010, then Prime Minister David Cameron announced plans to transform the area between Shoreditch and Olympic Park into what he called one of the “world’s great technology centres”. This led to the creation of the Tech City initiative. The startup company grew from 85 companies to 5,000 companies in just two years. The area around Old Street Underground Station has been nicknamed ‘Silicon Roundabout’ to reflect the area’s grand plans, and Google has set up an incubator hub to ensure it identifies and attracts top talent. has been established. However, Google has closed its Shoreditch campus due to the coronavirus pandemic and has been operating at a loss since its founding, suggesting it wants to focus on start-ups across the UK. Additionally, TechHub, one of the region’s first purpose-built coworking spaces, closed in 2020 due to unmanageable rent increases and reduced demand related to the pandemic.
So, now that the pandemic is behind us and the recovery is underway, has Shoreditch lived up to the hype and become the tech hub the Cameron government envisioned?
While the area was experiencing a predictable rush of activity from London’s developers, construction has fallen sharply over the past five years. After the announcement of the Tech City initiative, several large-scale office projects were planned, with nearly 3 million square feet of new and renovated office space constructed between 2014 and 2018. However, developers are pivoting from the office to other areas. Only half of these properties have been put on the market in the five years to 2023, and more than a third of them are vacant, significantly higher than the 20% figure in central London. This typically signals weakening tenant demand, and goes against the narrative that London’s biggest tech companies in particular are selling off excess space.
While demand has certainly increased over the past 15 years, the rate has not been significantly greater than in other parts of London. However, net absorption strengthened significantly in this region. Since 2009, the area around Old Street Roundabout has gained around five times as much demand as it has lost, compared to around half that for London as a whole.
This has led to a healthy increase in rental prices, particularly for 4- and 5-star rated properties, with the area outperforming other parts of London. Rent prices for quality space around Old Street Roundabout have increased by 70% over the past 15 years, while rents for buildings of the same grade in the wider London market have increased by more than 60%. While the increase is good news for landlords, there are also concerns that it may be squeezing out prices for some of their most loyal occupiers.
However, demand from tenants in the high-tech sector remains strong. In terms of absolute volume, the majority of rental activity comes from the finance and legal sectors, mainly concentrated in the area north of Finsbury Square and Liverpool Street station, while the presence of the tech sector is It is definitely increasing. When analyzing occupancy rates compared to 2009 levels, tech companies outperform most other sectors, with cloud banking company nCino recently paying £75 per sq ft for 18,000 sq ft at 19 Crown Place. High-tech companies pay the highest rents. During December. However, serviced offices and coworking are the top performers by some margin, and they are leading the way in terms of space acquisition. Last month, Knotel paid more than £80 per square foot for a 27,000 square foot site in Jairo. Given that 60% of UK start-ups fail within their first three years and are often reluctant to enter into traditional tenancies, The success of his flexible workspace is not surprising.
One of the themes of the past decade has been the erosion of London’s submarket boundaries as clustering becomes less important for businesses in the digital age. Few companies today focus their research on relatively small geographic areas, especially when access to amenities and transportation are becoming increasingly important to attracting and retaining staff. But the Silicon Roundabout remains a spiritual home, at least for the tech industry.
Patrick Scanlon is CoStar’s Senior Director of Market Analysis