London’s ‘Silicon Roundabout’ has emerged as the most expensive tech hub in the world, with rents beating those in similar areas in San Francisco, Dublin and Los Angeles.
Booming tech ecosystems are causing rents to surge in cities around the world as tech startups and larger corporates look to snap up the best digs on offer.
The average rent per square foot for office space in Shoreditch, considered the heart of London’s technology district, is £70, compared to around £59 in San Francisco’s Mid-Market area and Docklands in Dublin, where Google, Facebook and Twitter have their headquarters.
Renting an office in Shoreditch is almost twice as expensive as in Brooklyn in New York, where the average rent was around £43 per sq ft, according to property agency Knight Frank.
James Nicholson, partner at Knight Frank, told The Telegraph: “Whilst Shoreditch is just one submarket favoured by tech and creative firms, this submarket is the poster child for the growth of London’s tech driven evolution – the high rents reflect how greatly tech and creative firms value having an office in the capital.”
At the same time office developments around Kings Cross and Broadgate, just south of Shoreditch, have been marketing themselves as tech-friendly trying to steal attention away from Shoreditch.
But while different London regions may battle for tech supremacy, the real story is that office space across the capital is becoming a huge problem, with prices rising to reflect a growing lack of supply.
A flat in Pimlico has just been sold for £285,000, which may seem like a good price for a property in this sought-after area of south-west London. But the apartment covers less than 95 sq ft, which works out to a price of just over £3,000 per sq ft!
“There were two challenges that we experienced when marketing the property, the first being that it could only be sold to a cash buyer because banks were not prepared to finance the deal,” said Roger Collings, manager at RE/MAX Central, the agency that sold the flat.
“The second challenge was finding a buyer who wanted a property of this size…while the number of transactions has dampened, prime central London is still a sought-after address.”
The average price of prime property in Pimlico is £1,155 per sq ft, according to Knight Frank’s analysis of LonRes data.
The overall average price of homes in this London neighbourhood is £1,500,869, according to Rightmove, up 19 per cent over the past year.
However, across London, home prices slipped 0.6% in the quarter ended September, according to Nationwide. It’s the first decline since the financial crisis (in eight years).
The mortgage provider said the average sale price for a London home is £472,000, an increase of 56% from a decade ago and more than double the current national average.
DealMakerz have warned for over a year that Britain’s planned departure from the European Union could seriously damage London’s supercharged real estate market. The worry is that major shifts in law-making, immigration, investment and trade could scare away buyers – especially wealthy foreigners.
The Fintech Capital of the world is still booming and attracting the best global talent and niche buyers like the aforementioned Pimlico property are still selling – for now. Savills predicted this week that the most desirable London neighborhoods could see prices rise 20% by 2022, but Brexit is being felt across the City and UK as a whole and more pain could be coming: The Bank of England has strongly hinted in recent weeks that it will raise interest rates, making mortgages more expensive and consumers even more nervous.