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In the past few years, offices in Shoreditch have become the home of media, fashion and ‘creative’ clients. Its warehouse-‘esque’ buildings with their exposed brickwork and wooden flooring have attracted a number of large tech companies from across the world as well as from different parts of London to the area. Rents in the district have shot through the roof in recent months, with some office spaces being quoted close to £40 a square foot. There are a number of reasons for this: first, many potential tenants moving from others areas in London, such as Soho, will see this as a cost saving, since, even with rents in Shoreditch increasing rapidly, the reduction in business rates that these companies receive in and around Shoreditch is huge, with savings of around £15 per square foot.
Another main lure of this area is the type of office space it offers. The converted warehouses, with their original features kept intact, have become extremely popular amongst media tenants. The old conventional office space, with suspended ceilings and whitewashed walls, that Soho and similar places offer may be appearing now to be shunned by the TMT companies.
The third reason for the popularity of Shoreditch is its easy access to the city. Even though the tenants don’t wish to spend their time in the ‘glass boxes’ of the City, the quick and easy access into the centre makes the fringe area extremely desirable.
Canary Wharf has now reacted to this lack of demand from the tech companies by launching a 20-acre office scheme to attract the large fashion and tech companies over towards the docklands: the scheme will be called Wood Wharf.
Demand from the banking sector and large financial institutions for new offices has dried up in the wake of the financial crisis, and rents are dropping in some of the skyscraper buildings in the City district where floors are still empty. Canary Wharf has historically relied on huge demand from the banking sector to fill its office space; however, with the financial sector ailing, focus has been switched to the buoyant tech sector with a view to these companies plugging the gaps. Nevertheless, some believe that this alone won’t be enough and that the real demand will come from the residential sector in Wood Wharf. The significant and increasing demand and rising rents in the residential sector are very likely to have a far greater impact than the tech companies.
Yet Soho is traditionally the tech hub of London and this tradition may not be an easy one to erase. It is only relatively recently that tech companies have moved towards the east of London. Alex Goode from Morgan Pryce believes the main obstacle to the Wood Wharf development becoming a runaway success will be the location: “Tech companies have historically been located in the West End – predominately Soho – and would far rather be over there and paying the punchy rents than in the City. The lure of the city has never existed for them, so why would it start now …?’
Morgan Pryce is a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.