London’s Tech Sector Increases Pressure for More Coworking Space
A new report from Cushman and Wakefield, ‘Tech X the City’ has revealed significant pressure is mounting in London’s technology sector for appropriate workspace for the increasing numbers of emerging tech firms.
The report shows that smaller tech startups don’t want to be housed in the same type of space with the same facilities as their larger neigbours, and are seeking more flexible coworking environments that encourage collaboration and participation.
The rise of coworking space since the global financial crisis reflects increased demand from SMEs in the capital. Coworking space offers the flexibility in use and duration that emerging tech companies typically require, with the ability to scale up or down with relative ease.
Tech Sector Rejects Traditional Office Setup in Favour of Coworking
The serviced office sector accounts for around 3.5% of City office stock, which is on a par with central London. In terms of amenities, any startup wants a functional office, yet few would settle for a generic corporate space.
Given the choice of “bland but new” or “authentic but used”, most startups choose a second-hand refurb space that both makes a statement and keeps costs down. The one incubator currently in the City is in a period building that’s ripe for a refurbishment, but has a layout that allows group working as well as private meetings.
As one tech entrepreneur put it: “The thing with startups is that we are really here to do business and as long as a space makes financial sense and it’s good to meet clients then that’s OK. There isn’t such a thing as a perfect space.”
An environment where tech companies can attract talent is key. They also need locks for regulatory compliance. The provision of printers and copiers is an essential as most can’t afford them, whereas storage space is of limited importance. Connectivity must be a given, with no wifi blind spots and full mobile network coverage. Workspaces need hot desk and breakout areas as well as private meeting rooms.
The Challenge to London’s Office Landlords
By diversifying their own portfolios, landlords can broaden the City’s occupier base and widen its appeal. Any property offer needs to be mindful of the stage of evolution – a startup will typically employ between one and 10 people and require up to 3,000 sq ft, while scaling companies can demand anything up to 20,000 sq ft.
Multi-let buildings will be an increasing part of any portfolio. While landlords absolutely understand the need to cater for the startup sector, the same age-old barriers remain. These are the questions of covenant, lease-term flexibility and the impact on value. Landlords will be looking to de-risk these by entering into partnerships with third-party shared workspace providers. Or, alternatively, this is where the City of London Corporation can enter as the curator of space.