Last week tech giant Facebook announced that it would be hiring 1,000 more staff in London, bringing its total workforce in the capital up to more than 4,000.
And now new research from Knight Frank has revealed that it's tech tenants who are driving demand for prime rental properties.
When it comes to rental properties priced between £1,000 and £4,000 per week across London, Knight Frank’s data finds that from 2018 to 2019, the number of tenancies agreed rose by 35%, the number of new applicants increased by 22%, and the number of viewings rose by 18%.
“There has been a 10% increase in the number of tech tenants looking for prime accommodation in the best areas of London in 2019 compared to the previous year,” David Mumby, regional partner at Knight Frank, said, adding that this trend has gathered pace as tech companies have expanded their UK footprint. He also said this is more than compensating for any belt-tightening among financial companies.
“Marylebone has been a particular hotspot for them following the revival of the high street and surrounding area as a foodie and boutique shopping area attracting an upwardly mobile, affluent young demographic,” Mumby added.
Other takeaways from Knight Frank’s Q1 2020 London Residential Review include a 14% fall in the number of new lettings in prime outer London in 2019 compared to 2018, while average rental values in Prime Central London (PCL) grew 0.7% in 2019. Knight Frank forecasts an average 2% rise every year until 2024.
Meanwhile, in the sales market, the number of exchanges in PCL increased by 14% in 2019 versus 2018 - the highest total in five years
The ratio of new prospective buyers to new property listings in PCL and prime outer London was 10:1 in Q4 2019, the highest figure for over 15 years.
Tom Bill, head of London residential research at Knight Frank, commented: “The new government has indicated it will increase stamp duty for overseas buyers, underlining how housing remains a sensitive political issue as it looks to redress perceived socio-economic imbalances across the UK. This political approach makes any reversal of recent tax changes for buy-to-let investors unlikely, maintaining further downwards pressure on supply and upwards pressure on rental values.”
How much of a tech hotbed is London?
Facebook, Microsoft, Google, Amazon, Airbnb, Uber, Deliveroo, Just Eat and Apple all have bases or headquarters in London, while disrupters such as Bulb, Revolut, HelloFresh, Gousto, Monzo and Starling can all be found in the capital, too.
There are a high number of tech startups, especially based around the Silicon Roundabout in East London. Known as London’s technology hub, and Europe’s answer to Silicon Valley, the area of the capital encompassing Shoreditch, Hoxton and Old Street has a high concentration of digital firms, many of whom attract young professionals who fall under the bracket of Generation Rent or millennial renters.
Tech workers are more likely to be ‘digital nomads’, moving from place to place as opportunities arise, and therefore are more likely to appreciate the flexibility and lack of commitment (relative to owning a home) that renting brings.
In some cases, too, they can be very well-paid for the work they do, which explains why they are driving demand for homes in some of London’s swishest areas.
It’s probably no surprise that Marylebone is the top hotspot for this demographic. It’s a new kid on the block in PCL terms and feels less exclusive than other areas nearby, as well as having plenty of boutique and trendy foodie destinations to draw in a younger, hipper crowd.
A study from business advisory firm BDO LLP at the end of last year showed just how important and dominant the capital is when it comes to tech, with London and the South East of England accounting for 55% of the UK’s tech economy, despite the fact that only 27% of the UK’s working-age population is based in the region.
The technology industry in London and the South East was worth £47 billion in Gross Value Added (GVA) in 2019, up from £37 billion five years ago.
Investors and landlords with properties in these markets and others may be the ones to benefit as the UK’s tech prowess continues to grow.