Creative companies are moving from suburbs into city centres
Across the globe young, footloose, creative people are escaping the suburbs and moving to urban centres. The tech industry is no exception. Silicon Valley may be the world’s premier tech centre, but in recent years Valley firms have sought increasing amounts of space in downtown San Francisco. Wireless systems, the cloud and flexible working practices mean that major conglomerates no longer need huge offices for servers and staff – smaller units are just as viable.
Vibrant, mixed-use communities are at the heart of the new tech industry zeitgeist (see fig.1). The exchange of information and ideas is central to any creative industry, and tech is no exception. Creative clusters allow innovation to thrive. But it is not just innovation within a single company that is productive, the innovation of whole industries and the wider creative community makes a difference. This means the human interaction allowed by cities has become a key attraction in the search for workspaces by tech companies. Cafés, bars, shops, a variety of housing and low-cost office space provide the real estate foundation they seek.
While the city trend is shaping tech companies, the tech trend is also shaping cities. In New York, the tech industry is the second biggest employer behind finance and real estate, accounting for a third of private sector job growth since 2007. The growth in the tech industry has gone hand in hand with the city’s urban renaissance (see New York).
Major global players, such as Google or Amazon, sit alongside small start-ups and more established medium-sized firms in newly regenerated locations. These companies are fast growing and seek flexible, non-traditional office space, pushing up rents in creative clusters faster than in more traditional office districts in some locations.
In New York, rents for the space favoured by tech and creative firms are up 33% from a December 2010 low, compared to 20% for financial office space. In London, the city’s major landlords are actively profiling their stock to appeal to this growth sector, while Singapore’s ‘shophouses’ are proving attractive to tech start-ups looking for cheaper alternative space and have shown very high rental and capital growth.
Growing tech cities that offer a vibrant, creative urban scene will have a significant advantage in the world city race and should show superior real estate growth.