When one of Scotland’s best known legal firms, Tods Murray, fell into administration in 2014 it was a shock to the system - both for the professional services and commercial property communities of Edinburgh.
Tods’ former offices at Edinburgh Quay in Fountainbridge are now leased to Apple, Bloomberg and FreeAgent – the latter one of Scotland’s most recent tech success stories – a clear sign that Edinburgh’s office occupational market, much like central London, is changing in terms of dynamic, mix and profile.
Staying with the Scottish legal sector, one of our clients, Morton Fraser, found themselves with some surplus accommodation three years ago at Quartermile Two on Lauriston Place and shortly after sub-let nearly 7,000sq ft to a new joint venture between the University of Edinburgh and IBM.
These two stories illustrate the constant shift between old and new economy sectors, the rise of technology’s importance in Edinburgh and the need to address the changing property requirements of our cities.
The narrative around Scotland’s tech scene grows with every week – already this year we have had news of Skyscanner’s latest investment round, an industry call for a digital “tsar” and a report suggesting Edinburgh’s technology revolution means workspace design and functionality must now take heed of a new breed of workers in early stage tech companies.
We think there is another conversation to be started on the overall property requirements for start-ups as they outgrow their “room in the cupboard” incubator space but have some way to go before attaining the Skyscanner-type “take over the world” phase. It’s not a bad headache to have, but we must ensure our fast-growing digital companies have the right type of commercial property options as they scale and add staff at exponential rates.
What Jamie Coleman has created at Europe’s fastest-growing tech incubator – CodeBase at Argyle House on Lady Lawson Street in Edinburgh and one of our advisory relationships – is now an integral part of all the good things that are happening in our nations’s tech ecosystem.
By offering flexible space for rapidly growing ventures, companies like e-learning start-up Administrate are afforded the ability to take on more office space as they grow – extremely important for chief executive John Peebles when you consider the Administrate team has quadrupled in size during 2015. Arguably as important is the culture that is building at CodeBase, where over 50 start-ups and 400-plus people are now working on current and future software solutions.
At the other end of the scale, once-were-start-ups Skyscanner and FanDuel have transformed themselves into billion-dollar valued tech “unicorns” that have deep enough pockets to take the property hit of longer leases at some of Edinburgh’s most sought after commercial developments.
Skyscanner has over 400 people alone employed at its Edinburgh HQ on Quartermile, with FanDuel catching up in double time at the same development, together with Cirrus Logic – that’s great news for our property sector and even better news for the economy.
What we are left with however, is a growing middle ground between the start-ups like Administrate and the big tech beasts like Skyscanner, FanDuel and Rockstar North, the developer of the phenomenal video game franchise that is Grand Theft Auto.
Collectively, we need to address whether we are putting enough thought and planning into this middle ground.
There are parallels to be drawn between the gap in the market when it comes to property in much the same way as it applies to follow-up funding; like the private investment market where we have no shortage of business angels at inception stage but face challenges with the next level of investment required, so too we are lacking the next rung of the ladder when it comes to property to house our scaling digital ventures.
The commercial property market needs to respond innovatively to the design, specification, leasing strategy, covenant issues and valuation implications of a growing tech hub like Edinburgh.
Traditionally, business owners have required three things from their offices – a good location with car parking, a reliable building in terms of services and a sensible price. With our new breed of tech companies you can add the following to the list: highly flexible lease terms, an in-building cafe or bar, a community environment that encourages peer-to-peer collaboration, bike racks, showers and a central location close to public transport.
Savvy developers, investors and advisers are now eyeing the product and financial models that will attract this burgeoning but disparate collection of coders, marketeers and creatives coming out of Edinburgh’s Universities and who are looking to remain within the city and fully embrace its exceptional digital knowledge economy.
This activity, coupled with the agglomeration of high end financial services businesses at a rejuvenated Charlotte Square and the re-emergence of St Andrew Square as a prime office location, all serve to underpin a vibrant, compelling and re-energized Edinburgh office market.
• Nick White is a director at property consultant CuthbertWhite