When Allied London confirmed in 2015 that media giant Sky was going to open a technology hub at its Leeds Dock development, it was a massive coup. Was it also an endorsement of the city’s ability to attract the growing TMT sector?
The property developer’s latest signing in the city certainly supports this idea. Sports data and technology firm STATS, which counts tech heavyweights Google, Apple, Facebook and Microsoft among its clients, has also chosen Leeds Dock for its European headquarters.
Add to this the news that co-working hub Aireside House is set to open in Leeds this quarter, while BT, Sky Bet and Vodafone already occupy 228,000 sq ft in the city between them. Is Leeds moving out of the shadow of neighbouring Manchester, which has already garnered a tech city reputation, and what is driving it?
“Leeds has probably played second fiddle to Manchester for a while,” says Tom Goode of Sanderson Weatherall. “With the BBC going there, the MediaCity development at Salford has been a big draw for TMT occupiers. But I think Leeds is starting to come into its own.”
It certainly looks that way. Tech occupiers have taken more than 1m sq ft of office space in Leeds since 2010 and that is growing, although financial and professional services still dominate (see box).
This influx of tech occupiers has contributed to the 8,500 digital and technology businesses that are in the city today, employing 70,000 people between them. This melting pot of TMT firms of all sizes, from start-ups to global giants, has led to the prediction that the growth rate of digital jobs in the region will outstrip non-digital by 10 to one.
The £8.5m Digital Enterprise Programme will no doubt help. Launched this month by the Leeds Enterprise Partnership, the scheme will make up to £5,000 available to eligible SMEs to invest in digital technologies or advance their digital skills as they look to expand.
In addition, Creative England is hosting its latest GamesLab funding and development programme in Leeds because it says it is a “hotbed for gaming talent”.
“Leeds has got room to grow,” says Jeff Pearey, JLL’s lead director for Yorkshire and the North East. “There is clearly some competition with Manchester for staff, but if Leeds is beginning off a slightly lower base then there is more opportunity in the city to develop.”
So what is it about Leeds that has inspired such confidence in the TMT sector? For a start, it is affordable. With grade-A office space being leased for around £27.50 per sq ft (according to EGi data), Leeds is competitive when compared with Manchester’s £34 per sq ft and London’s tech hotspots such as Shoreditch – £62.50 to £72.50 per sq ft.
Leeds headline rents have risen a by £1 per sq ft in the past 12 months, according to EGi, whereas Manchester’s rents have stayed the same, which is good news for landlords and developers in the Yorkshire city.
“It would be nice to be on a par with Manchester, but that market is probably slightly bigger than Leeds, and probably more international, thanks to the airport,” says Goode. “But that’s not to say that Leeds can’t give Manchester a run for its money. For people making their first move out of London or looking to set up a major Northern Powerhouse office, Leeds will come first.”
But it isn’t just property costs which attract tech occupiers, having an available talent pool is crucial. Matt Grest, Sky’s director of digital platforms, explains: “We looked globally and ultimately decided on Leeds. For all the cities we looked at, we put a pin in a map and drew a circle representing an hour’s commute radius to see if we could get the skills we wanted within the circle. Leeds came out very positively on that.”
In 18 months Sky has expanded its workforce in the city from 40 people to 650.
“What’s even more incredible is we had around 6,000 applications to come and work for us, so we were able to be quite discerning over the quality of people we brought in,” he adds. “It just shows the size of the tech workforce in Leeds.”
Also in Leeds’ favour is its digital connectivity. It is also one of a select group of UK ‘Gigabit Cities’ – cities with internet download speeds of more than one gigabit per second – while London, Manchester and TMT hotspot Cambridge are not.
More than 117km of pure fibre digital infrastructure has been installed, allowing businesses and the public sector in Leeds to tap into network speeds up to 100 times faster than the national average. This sort of bandwidth is desirable for any business, but for tech firms even more so.
So is there anything holding the city back from developing into a major UK tech cluster?
According to Tim Gee, estate director at Leeds Dock for Allied London, Leeds – like most cities – is missing a joined-up and cohesive citywide approach and a Sir Howard Bernstein-like figurehead.
“Sometimes you need just one person who has all the right ideas as well as the ability to deliver,” he says. “It needs someone to sell it. To bring everyone together – Allied London, the council, the LEP, HS2, Vastint – to all go down to MIPIM and tell people to look at our masterplan and come to Leeds.”
Sky’s Matt Grest agrees: “People from Leeds are a modest bunch and don’t like to shout about the fact that it’s a thriving city with a great music scene and fantastic restaurants.”
Indeed, the city’s retail and leisure markets have thrived in recent years. Land Securities moved the needle when it opened the £200m 780,000 sq ft Trinity Leeds shopping centre in 2013, with restaurant group D&D first venue outside of the capital, while Hammerson’s £165m Victoria Gate retail scheme opened last year anchored by John Lewis.
This expansion of both the TMT and retail and leisure markets have been in correlation, according to Goode, who says that the more people are drawn to the city and with the emergence of new occupiers, the more need there is for amenities and services.
It is little wonder that Paul Fairhurst, head of Savills Leeds, points to a future that is brimming with opportunity: “With strong tech-related requirements in the market, some of the fastest internet speeds in the country and flexible, affordable office space available, the tech sector looks set to continue flourishing in Leeds.”
Industrial revolution?
Leeds is the largest centre for financial and business services outside London. But does this influx of TMT occupiers into the city suggest a new industrial revolution is on the cards? Not exactly.
The stronghold that the financial and business service sectors have on the Leeds occupier market shows no sign of waning. They account for 38% of the city’s total economic output and are expected to generate more than half of the 25% growth that has been forecast for the city over the next 10 years.
But as financial services grows, so too does fintech, a sector that Leeds is keen to support. It hosted the inaugural Fintech North festival last year and such was its success, it is set to return to the city this year.
“I don’t think you can ignore technology, nor its influence on the financial services sector and fintech,” says JLL’s Jeff Pearey. “Of course, if Leeds has got this strong position in respect of legal and professional services, then there’s got to be a level of technical support on the back of that as well.”
Skills pipeline
One of the reasons Sky chose Leeds for its new technology hub was its central location, in easy reach of major cities and towns including Manchester, York, Hull, Doncaster, Darlington and many more. And it has a good source of fresh talent too.
“The universities in Leeds are quite renowned for their tech-based courses and some of the entrepreneurial programmes they run are amazing,” says Tim Gee, Allied London’s estate director at Leeds Dock.
“They have co-working spaces as well as incubator, funding and seed investment programmes. It’s very forward thinking.”
Number crunching
£47,959
Average digital salary
£671m
Total GVA
Source: Tech Nation 2016
8,522
Digital organisations
70,000
Individuals employed by digital organisations
Source: Data City Leeds
£28
Grade-A office rent per sq ft
2.3%pa
Predicted growth in Grade A office rents over next five years
47%
Proportion of space delivered in 2016 that was pre-let
2.8%
Growth rate of tech sector in past five years
5.6%
Predicted growth rate of tech sector over next five years
2
Years supply of grade-A office supply in Leeds city centre
Source: Savills
