20 October 2016
South Bank takes on tech hub Shoreditch

It may be where the hipsters hang out, but Shoreditch’s position as the number-one choice for technology and creative businesses is now facing strong competition from the South Bank.

South Bank takes on tech hub Shoreditch

20 October 2016 | By David Parsley | PropertyWeek Article

It may be where the hipsters hang out, but Shoreditch’s position as the number-one choice for technology and creative businesses is facing competition from a south London rival.

For half a decade, the once run-down area of east London has been the obvious location for tech and creative firms. Recent evidence, however, suggests Shoreditch’s tech-belt crown may be slipping.

Earlier this month, the biggest sign yet that London’s City fringe - Clerkenwell, Farringdon, Old Street, Shoreditch and Whitechapel - is losing its dominant position among the trendsetters came when HSBC decided to locate its new fintech hub at the South Bank’s Blue Fin building.

As Property Week revealed two weeks ago, HSBC is putting its research boffins into 50,000 sq ft at the Blue Fin, paying around £65/sq ft. The fashionistas at PR company Brands2Life are also set to move into the Blue Fin, taking up a further 11,000 sq ft on a similar rent. So what’s tempting Shoreditch’s tech hipsters over to the South Bank?

Whether you call them TMT (technology, media and telecoms) companies or prefer to use the new DAMIT (design, advertising, marketing & PR, media, internet and technology & telecoms) label, this relentlessly growing occupier group is no longer just attracting the attention of the developers and landlords in the vicinity of the Silicon Roundabout.

South Bank buzz

Sure, Shoreditch has had its share of lettings lately, such as Adobe taking 28,000 sq ft in Derwent London’s White Collar Factory, but there is an undeniable buzz on the South Bank.

And little wonder. While Blue Fin landlords Oxford Properties and Temasek probably reacted with a sharp intake of breath when current occupier Time Inc. handed back 80,000 sq ft of its 120,000 sq ft in the building, they have already almost filled the space the US publisher is leaving behind. Underlining its confidence in the area, Cushman & Wakefield is now marketing Time Inc.’s remaining space at a whopping £72.50/sq ft.

Another agent enjoying the area’s renaissance is Simon Smith, a partner at Union Street Partners. The firm did 27 deals between Tower Bridge and Westminster Bridge in the third quarter of this year alone. In total, there have been more than 50 DAMIT lettings in Southwark over the past 18 months, according to Union Street Partners data.

“In the past, we found when requirements from the TMT occupiers were circulating, Shoreditch, Clerkenwell and Farringdon topped the search lists,” says Smith. “The South Bank often wasn’t even on the list. But that has changed. We’re now very much up there, or even ahead of Shoreditch these days.”

The area was given a major boost when Rupert Murdoch’s News UK business moved into new offices at London Bridge in September 2014. Now you cannot move for trendy brand specialists and PR types such as Omnicom. Indeed, 40% of London’s media businesses have a presence around the South Bank, according to Smith.

Moreover, there’s plenty of space coming on stream in Southwark, whereas it is running low in Shoreditch. Hermes Investment Management and Canada Pension Plan Investment Board have just launched the 220,000 sq ft South Bank Central, and are understood to be close to securing a chunky first letting of 35,000 sq ft to energy and technology group DNV GL - again, for a rent around the mid-£60s/sq ft. Union Street Partners and CBRE are the letting agents for the scheme, formerly known as South Bank Tower.

The upshot of plenty of space is plenty of interest. “Southwark has grown into something rather special in recent years,” says Smith.

“With the improvements in the transport hubs at London Bridge and Blackfriars, a raft of new, upmarket restaurants, the improvements to Borough Market and all the cultural attractions such as Tate Modern, the Globe Theatre and the Southbank Centre, this is where Generation Y wants to be. It’s a place to live, work and play.

“It’s a seven-day-a-week location. That’s why you see all the top chefs like Gordon Ramsay and Marco Pierre White coming here. There’s also a Hoxton Hotel opening up soon.”

That upscale hotel will be in Wedge House, which once represented the only development site south of the river for Derwent London, the firm that coined the moniker ‘tech belt’.

John Burns, chief executive of Derwent, is not unduly fazed by the growing reputation of the South Bank as a tech location.

“Shoreditch isn’t going to lose its crown at the moment. It’s top for tech space now, and occupiers are prepared to pay a little more to be there,” he declares, pointing out the forthcoming Crossrail station at Farringdon.

“When that opens, the Clerkenwell, Shoreditch and Whitechapel areas will become the best connected in London, with fast transport links in all directions.”

Derwent is rumoured to be fetching around £70/sq ft at its White Collar Factory in Old Street Yard, a fiver or so above top South Bank rents right now.

Location, location, location

Like Burns, Rachel Lockhart, an associate in Allsop’s City office, believes Shoreditch has little to worry about.

“While the South Bank is a great location, Shoreditch remains the favoured destination when it comes to TMT occupiers,” she says. “Key to the tech sector’s success is access to talent and Shoreditch is on the doorstep of Whitechapel, Hackney, Dalston and Stratford - popular neighbourhoods with tech workers. Then there is Shoreditch’s proximity to the City of London, which is essential for fintech firms.”

Others agree. Brett Sullings, head of commercial agency and investment at Stirling Ackroyd, says he has seen the rents of £15 to £20/sq ft a few years ago replaced by prime City-like rents in schemes such as the White Collar Factory, and not far off those in Helical Bar’s Bower scheme on Old Street.

“With Amazon’s imminent arrival at Brookfield’s Curtain Road development, we anticipate a new influx of DAMIT occupiers eager to be close to the action,” he says.

Many are drawn by the same factors that attracted them five years ago, adds Chris Antoniou, a partner at tech-belt specialist Anton Page. “Tech companies have always found success in sharing ideas and information and have benefited from clustering in certain locations, particularly Shoreditch,” he says. “In our experience, many fledgling companies emerge from such environments and then look to locate into self-contained offices in the immediate surrounds. This will inevitably continue in the foreseeable future.”

That may be so, but their counterparts just a couple of miles south are equally optimistic. James Couse, head of Lambert Smith Hampton’s South Bank agency, believes Shoreditch agents should be nervous. “We have experienced a renewed demand and interest, especially from the TMT sector in the third quarter,” he says.

“With the significant transport hub improvements and future development in Borough High Street and Long Lane, the location continues to improve, encouraging further investment. Bankside has its own identity, and appeals to a multitude of different businesses.”

For so long the go-to district for DAMIT firms, the Ditch finally has a serious rival for its crown, especially if Blue Fin gets close to that £72.50/sq ft asking price for its last 11,000 sq ft. The battle is on.