This demonstrates the increasingly important role of corporate demand in the prime rental markets across world cities, says the report from international real estate firm Savills.
Traditionally, the financial and insurance services sector has dominated the corporate relocation market with 50% of tenants working in this area in 2007. But in the aftermath of the financial crisis they now account for just 39% of the market, signifying the shifting nature of employment in the capital.
In its place there has been a rise in the number of technology industries locating in the capital, facilitated by the development of ‘Tech City’ in the east and the recent regeneration of King’s Cross.
‘London attracts companies from around the globe and remains one of the world’s most important centres for global commerce. Consequently, we have a diverse range of different tenants from all business sectors looking to relocate to areas throughout London,’ said Matthew Salvidge, the firm’s head of Corporate Services.
Over the next five years it is estimated that there will be an additional 368,000 employees in London, and around 25% of these will be accounted for by the technology industry. It is set to become the largest industry in central London, and growth in the sector across the UK will outstrip that of California’s ‘Silicon Valley'.
Compared to employees in the financial and insurance industry, who from 2007 to 2013 increased by 6%, underperforming the London average of 10% growth, tech industry employees grew by 19% over the same period.
The latter, however, have on average 25% less budget when relocating and the report points out that this disparity naturally impacts on where they choose to live in London, resulting in a locational shift.
The tech industry has traditionally been concentrated around Old Street and has dispersed outwards from there. Consequently, areas such as Highbury and Islington have benefitted from a rental perspective, with 22% of employees living in these areas working in the sector. This is due to their easy accessibility from the core technological hubs and excellent transport links.
Areas surrounding and easily commutable to King’s Cross, the location of Google’s new headquarters, are likely to enjoy similar success and Savills predicts a 9% increase in office based employment here by 2018. Financial services employees on the other hand prefer living in prime central London locations such as Chelsea or near to their work, in Wapping.
By 2018, while the number of employees in the financial and insurance sector in central London is forecast to remain the same, employees in the professional, scientific and tech industry are set to increase by 16%, making it the largest industry in central London according to Oxford Economics.
‘As the tech industry continues to expand, this extension in popular locations will continue and the demand for rental properties suitable for corporate relocation tenants will increase,’ said Sophie Chick, a research analyst at Savills.
‘This presents an opportunity for landlords and investors to target these emerging corporate markets and take advantage of the resulting locational shift,’ she added.
