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Technology and media businesses doubled their uptake of office space in the City of London during the first six months of the year, providing the strongest evidence yet of the transformational shift in the area long dominated by banks.
Companies in the TMT sector, including Skype and Oracle, took leases on 731,000 sq of new space during the first half of 2012, compared with 367,000 sq for the same period last year, according to data from Knight Frank, the property services group.
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The surge in uptake comes as financial institutions across the Square Mile downsize, and points to what many City property experts suggest is a revolution in the type of companies that want to be based in London’s pre-eminent business district.
“The kind of businesses coming into the City now are the sort which would, traditionally, have taken up office space in the West End,” said Bradley Baker, head of central London tenant representation at Knight Frank.
“It is making it a much more diverse place, with banks increasingly as just one group of entities with offices in the City,” Mr Baker added.
As well as Skype and Oracle, which took up a combined 100,000 sq ft, Bwin, the internet gaming group, and Monetise, the online payments company, agreed leases of 20,000 sq and 42,000 sq ft, respectively, in the same building on Cheapside.
One of the largest drivers of non-financial services companies coming into the City is the fact that rents have remained disproportionately subdued compared with surrounding business areas.
Since the middle of 2009 – the nadir of the commercial property market – rents in the City have risen from £42.50 per sq to £55 today. In contrast, Covent Garden rents have risen from £45 per sq to £65, while in Mayfair rents have gone from £65 per sq to £95 over the three years.
The upshot has been to push non-financial companies into the City. In 2007, at the start of the financial crisis, TMT accounted for 10 per cent of new office space leased. In the first half of this year, that figure hit 27 per cent.
However, the changing face of the City is as much to do with the rise of entertainment and shopping facilities as it is with affordability, according to its planning authorities.
“We have totally changed the City from being a place that people only came to work in to a place where people might just as likely come for a night out,” said Peter Rees, the City of London planning officer.
“That is the reason that a lot of technology and media companies are taking up space here; it is the only way they can hang on to the bright people in their 20s and 30s,” he added.