TECH firms and a booming digital economy are driving up commercial property rents in Edinburgh and London, reflecting trends seen across global cities, new research has revealed.
High-profile deals in the Scottish capital, such as fantasy sports game developer FanDuel moving its headquarters to Quartermile, have seen the technology, media and telecommunications (TMT) sector account for a significant proportion of the city’s total office occupier deals in 2015, according to property consultancy Knight Frank.
The firm’s latest Global Cities report shows a steady rise in rents for locations around the world that are now home to a large number of digital, creative and technology businesses.
Analysis by Knight Frank has found that the TMT sector accounted for 34 per cent of total take-up in Edinburgh last year, or some 251,500 square feet – higher than the city’s financial services sector.
This year, TMT take-up has risen progressively with 39,457sq ft let during the first quarter and 41,534sq ft in the second. This more than doubled to 85,637sq ft in the three months to the end of September, taking the total to 166,628sq ft for the first nine months of 2015. The city centre has been the principal beneficiary of the rise in TMT take-up. As a result, rents in the area are showing “strong signs of growth”, according to Knight Frank, and could rise beyond £30 per sq ft for prime stock by the end of this year.
Toby Withall, office agency partner at Knight Frank, said: “TMT companies have performed strongly over the past two years, and now make up a substantial portion of the commercial property landscape in Edinburgh.
“Significant deals from the likes of FanDuel show that the sector is riding high and performing exceptionally well – mirroring some of the activity we have seen in London.
“Take-up in Edinburgh has been strong so far this year, with TMT companies accounting for nearly one fifth of the total in the first half of 2015. With a number of deals on the horizon, we only see that rising and this year’s figure could surpass 2014’s performance and register its best ever year.”
He added: “Access to transport links, Edinburgh’s strong academic institutions and a formidable skills base are just some of the reasons why it stands out as a prime location for up and coming tech firms. The younger workforce, which the TMT sector tends to attract, also has a need for a different mix of amenities and less corporate-focused micro locations in the city.
“That could boost take-up from a variety of new businesses looking to provide services to this market.
“What’s particularly encouraging is that steep growth for the TMT sector is likely to have a knock-on effect for the property market, creating fresh demand in the city. Traditionally, other sectors that underpin the Edinburgh market tend to move around to offices of a similar size to their existing premises.”
The positive letting story in Edinburgh has been mirrored in London, with the Global Cities report finding Shoreditch witnessing 26.3 per cent growth and Southbank 19.8 per cent for the same period.
In contrast, expensive but popular hubs like Mayfair only grew by 7 per cent while the core area around the City registered growth of just 2.4 per cent.
Philip Hobley, head of West End leasing at Knight Frank, said: “Taking into consideration the constrained development pipeline for central London, the Crossrail stations with over-site development and their surrounding schemes, as well as the continued demand from occupiers to house their increased head count, we expect the area’s positive performance to continue.”