Out of control rents in Silicon Roundabout push tech startups away

Silicon Roundabout in Shoreditch, a reference to Silicon Valley in California, is home to a huge number of tech businesses and a popular location for start ups.  But the soaring cost of property in this sought-after location is pushing new companies away in favour of more competitive rents elsewhere.

Renting office space anywhere in London brings with it huge advantages to start ups. There is the potential of thousands upon thousands of clients on the doorstep, the prestige of a London office location, world class facilities, good national and international transport links, access to talent, the ability to charge more – not to mention that London is just an incredible city with a vibrant – sometimes insufferable buzz.

But start ups are of course more price sensitive than any other type of business and the spiralling costs of office space in this location is causing more than a quarter of existing tech companies to consider moving away from the Capital completely, with over two in five saying  they don’t have the confidence that London will be able to meet their company’s needs as they grow over the next five years. Over 70 percent of London’s tech leaders also state that they believe rents will rise substantially over the coming three years. Consequently small growing businesses are looking at alternative areas such as the Docklands, Canary Wharf, Aldgate and Whitechapel, but research by Tech London Advocates suggest they would even consider upping and moving beyond the boundaries of the city.

Another report by BNP Paribas suggests that 2 million additional square feet of space will be required by 2017 to accommodate the number and size of media and technology firms wanting to base themselves in the  City.

Unfortunately many of the office space opportunities within London are on long term lease. Deloitte’s Head of Tenant Representation Chris Lewis explains:

“If you take that 15-year lease away and replace it with 15 leases of two years or less, suddenly the ability for you to raise money against that and therefore satisfy banks is that much less. The investor and the landlord will have a set of priorities around their development and most of that will be around strength of covenant, the rent that they can achieve and a long lease term. Those three key criteria, which the property market revolves around, are also three big challenges for this cohort [of start-ups]”.

What then for start ups? Faced with rising rents and an insistence on long term lets, the best advice is for them to look at alternative office space solutions. For example, Angel Offices provides serviced office space with short term flexible contracts and affordable, realistic pricing, perfect for the start up business. We also have shared office space and hot desking, ideal for start ups who need a place to work but are on an extremely limited budget. Get in touch for advice on the perfect solution for you and pricing to meet your budget.

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