London's start-ups are spreading out of Tech City

New data shows that London start-ups are increasingly looking beyond the Shoreditch-based Tech City hub for their premises.

Map of start-up property searches in London

Figures released by office space rental marketplace Hubble show that 66 per cent of start-ups are now searching beyond Tech City, with Shoreditch (home of the technology sector hub) only receiving 34 per cent of all searches.East London is still prominent, but alongside Shoreditch locations such as Soho (18 per cent), Southbank (13 per cent), North London (8 per cent) and Clerkenwell (16 per cent) are attracting attention. See the map above for a visual representation of how start-ups are spreading out."This data is really exciting. It suggests that the creation of start-up clusters all across London is not only possible, but is already happening. Central London locations that are cheap, near other start-ups and close to clients are very attractive for our customers," says Tushar Agarwal, Hubble co-founder and CEO.A recent report from Tech London Advocates, a group of tech leaders and entrepreneurs, showed that despite 71 per cent of survey respondents expecting rents to rise, only 25.7 per cent had considered relocating outside London.Despite this, space in the Shoreditch area is increasingly at a premium as businesses grow both in number and headcount. Tech City UK's Tech Nation report showed that a fifth of the 228,572 digital companies in London were formed in 2013 and 2014 alone. Market researcher Experian said that the number of people working in the capital's media and tech industries will rise from around 400,000 to 465,000 by 2020. According to a report in February from BNP Paribas Real Estate, that all adds up to an additional two million square feet of space being needed to accommodative growth in media and tech by 2017.Rent increases certainly seem to have a part to play in the spread of start-ups from Tech City. Knight Frank says that in the last year alone rents increased by an average of five per cent in the 'northern city', which includes Shoreditch. Anecdotal evidence suggests that in parts of Shoreditch it has shot up by as much as £25 per square foot in the last two to three years.Commentators have noted that as larger companies move into the Tech City area to take advantage of the technology business ecosystem there it's proving more difficult for start-ups and scale-ups to compete for space.Comments from Juliette Morgan of commercial real estate firm Cushman and Wakefield made to Tech London Advocates support the evidence of a shift. She said that "we are already seeing that companies are moving about and scattering the concentration of the clusters". She pointed to emerging areas such as King’s Cross, Hammersmith, Soho and Southbank emerging as "lilypads".Hubble expands on this point. "Start-ups benefit from being near one another as well as their customers and peers. Tech startups are generally not purely technology companies: they use technology to innovate across industries. It’s no surprise, then, that FinTech startups want to be in the City or Canary Wharf, design startups love Clerkenwell and media startups head to Soho," commented Tom Watson, co-founder and CTO of the firm.As to why these 'lilypad' groupings are happening now, a Hubble Re:locate: “The proximity, we believe, comes as a result of the greater demand for sharing space. With rising property prices, people have become more willing to give up private space for shared or co-working space. That's essentially why this is happening now and we'll see more of it over time.“Along with this comes a need to group companies that work towards similar aims.“For example a quiet tech development team may not want to work near recruiters who are always on the phone. To this end, as the option now exists, people have started to work with similar industry companies that have potentially complementary needs and have started to bunch up together.“Another reason is because the sharing economy is starting to assimilate itself well into British and London culture, people are more open to spreading to spaces where they might not have been able to before due to higher private office prices.”While rising rents don't seem to be driving start-ups out of London, there's a possibility they might not actively seek to set up in the capital. Northern tech clusters in places like Manchester, Leeds and Sheffield are on the rise, and the government is keen to push them along with its Northern Powerhouse initiative. In a recent survey from Robert Half Technology 87 per cent of IT business leaders said that they would prioritise working with businesses in the TechNorth hub over London, given the choice.Despite growing rents and competition from elsewhere, however, the numbers show that there's still plenty of scope for the thriving tech sector to grow in London.For more news and articles like this, see Re:locate's Technology and Enterprise sections.Updated to include additional comment from Hubble.

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