A quiet revolution has been going on in Europe’s cities over the last decade or so.
City office markets once focused around financial services occupiers have been gradually ceding ground to new tech industries. Nowhere is this truer than in London.
In 2007, the last full year before the global financial crisis took hold, office leasing in central London by tech companies was 1.4m sq ft.
This was just over a third of the 3.9m sq ft accounted for by the financial sector. Fast forward to the last four quarters of available data and things look very different.
Tech take-up at 2.8m sq ft has overtaken financial services (2.5m) - a 98% increase for tech and a 36% decline for financial. Add in some of the large increase in space taken by co-working providers, which is really aimed at tech but is classified as business services, and the increase is even more impressive.
The boom in the tech and associated creative industries has driven jobs growth and been responsible for the expansion of city centres outside core central business districts (CBDs) and into ‘CBD fringe’ areas in the inner cities. What’s more, it has contributed to the reassertion of city centres as desirable locations over the more remote business parks once in vogue.
Dominant European tech city
This trend started in the US but as Understanding Europe’s Technology Clusters - a new report from CBRE - shows, London has been the dominant player in the European tech boom.
London is Europe’s most important tech cluster and has been at the top of the European jobs creation league table for the past decade.
London is a world leader for technology-based industries
Following June’s vote to leave the EU, London’s tech sector has taken on even greater significance. Much of the focus has been on financial services and on passporting rights post-Brexit. No one doubts the importance of financial services as a wealth generator for London, but we also need to acknowledge the competitive position of London’s tech sector.
London has established itself as a world leader for creative and technology-based industries by virtue of its location, language, legal and political structures, financial infrastructure, existing business clusters and openness to global companies and global talent. London also offers a wide range of social and cultural attractions, in addition to proximity to a number of world-renowned universities that generate large numbers of technically skilled workers.
Most of this will not change with Brexit. Technology and creative industries are, in general, not affected by regulatory restrictions or fears over single market access. And announcements in recent months by a number of big global tech companies of further commitments to London have gone some way to bolster the feeling that London’s tech sector might be Brexit-proof.
This does not mean there is room for complacency. Before the referendum, London’s tech companies were concerned about their continued access to skilled labour from other countries in the event of the UK leaving the EU.
Of course, the government, being aware of this and of the vital importance of the tech sector to the economy, will not kill the goose that is laying the golden eggs.
A well-designed migration policy can accommodate the needs of the tech sector in various ways including a well-designed points system, a tech visa scheme or even a London visa scheme.
Let’s not forget, though, that some kind of migration policy will be central to the government’s Brexit strategy and we should be wary of the law of unintended consequences.
On the other hand, Brexit can create opportunities. Talent in the tech sector does not just come from Europe. It is global, and a new, well-designed migration policy could give the UK’s tech sector access to an even greater talent pool.
Neil Blake is head of EMEA Research at CBRE