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CITY OFFICE SPACE ATTRACTS TECH GIANTS

The Technology, Media and Telecommunications sector accounted for one in five offices let in Europe in 2014. Cityscape takes a closer look at this phenomenon and asks if tech is taking over.

July 2015

Key office markets in Europe are being saturated by the Technology, Media and Telecommunications (TMT) sector, as fast-growth start-ups move into the cities for office space that offers access to key talent and address prestige.

The TMT sector accounted for 22% of total office take-up in nine European markets in 2014, according to Colliers International’s IQ Report, a biannual TMT-focused research paper.

The IQ Report, which looked at office take-up in London, Dublin, Amsterdam and Germany’s Big 6 – Berlin, Munich, Hamburg, Frankfurt, Dusseldorf and Stuttgart, saw TMT occupancies increase by 8% on 2013 figures.

Some markets are seeing huge gains. Dublin saw TMT account for 35% of annual office take-up. Similarly, Amsterdam saw 80,000 sqm of office space taken by the TMT industries – a 30% market share. Berlin saw a 30% increase in TMT office space, with 132,000sqm taken – nearly 20% of all space leased.

Not surprisingly, big names from the U.S. were central to this increase. Google took 33,000 sqm in King’s Cross London on a short-term lease while it awaits the completion of its new 2,000 sqm HQ in 2019. Google also announced the opening of new Google Campuses in Warsaw and Madrid. Excluding its campuses, Google currently occupies more than 230,000 sqm of office space across Europe. Meanwhile, Facebook leased 11,600 sqm in Dublin, taking its local footprint to 22,000 sqm.

PRESTIGIOUS ADDRESSES

There are many reasons for the shift, but according to Colliers a lot of it is to do with prestige, talent and simply having the funds available.

“Technology giants still want to be in city centres for the prestige, attracting and retaining the best talent, for the amenities and environment. Some of them have still got substantial amounts of cash and can pay the higher rents,” explained Bruno Berretta, Colliers International EMEA Senior Research Analyst.

However, not all cities tell the same story. London saw its TMT office take-up fall 20% to 330,000sqm in 2014. The IQ Report attributed this drop due to larger requirements having already being satisfied. Munich mirrored London with TMT office demand falling 11% to 119,000sqm.

“Start-ups are feeling the squeeze and are forced to look elsewhere, at the fringes and key hubs. In London – Aldgate and Whitechapel are popular – so I think this is a trend very specific to this moment in time, where rents are going up. Even in the future, with new development, we will see the map of technology occupiers changing – so in London that means a shift towards the east,” predicted Berretta.

“There are new areas opening up in other cities as well, strongholds for the tech industry. Smaller companies are taking space in periphery areas and then using the rent savings to build out the office to meet their needs.”

According to the IQ Report, urban regeneration will help alleviate these pressures and provide fertile ground for tech companies’ expansion beyond their traditional strongholds. It could also bring tech companies closer to their talent pool – a young and tech savvy workforce – who is being pushed out of city centres by rising housing costs.

The report stated: “Across most markets, there is a divide between the specific needs and locational choices of younger and more mature tech occupiers, but with some common underlying drivers such as visibility, accessibility and the ever-important talent attraction and retention.”

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