This year has been one of the most tumultuous the office sector has ever seen. Offices across the UK were left largely deserted as working from home became the norm in an abnormal world and activity in the leasing world slowed. Dramatically.
The year started positively for TMT, with take-up figures across the UK reaching 586,829 sq ft, according to Savills – a 78% increase on the same period in 2019. But Covid-19 and the consequent lockdown soon put an end to that boom. In Q2, TMT take-up figures totalled just 81,226 sq ft, some 80% less than Q2 2019. Activity picked up in Q3, with 109,465 sq ft let, but totals were still 75% down on the previous year.
The story was echoed in the capital. Radius Data Exchange figures show how things were looking rosy in Q1 2020, with take-up increasing from 419,657 sq ft in 2019 to 500,538 sq ft in the first three months of this year. In Q2, take-up was just 150,679 sq ft – a more than 50% drop on Q2 2019, and in Q3 it totalled 157,402 sq ft, dramatically lower than the 605,298 sq ft of activity the year before.
But Steven Lang, commercial research director at Savills, says the decline in leasing activity does not signal the death of the TMT office. He says that VC investment into TMT companies has boomed over the course of this year, which should have a positive knock-on effect on office requirements.
“In 2018, roughly £17bn was invested into TMT companies, which resulted in 2019 take-up of about 1.8m sq ft across the key regional markets in the UK,” says Lang.
He believes that by the end of 2020, TMT take-up across the UK could reach 927,000 sq ft and will bounce back to 1.7m sq ft in 2021.
Investment trail
Lang expects to see healthy demand across several regional cities where tech investment is on the up.
These include Oxford, where VC investment has surged from £204m in 2019 to £3.2bn this year, aided by the booming life sciences sector, and Leeds, which has seen investment grow to £125.1m this year, up from £17m last year. Birmingham, too, could see an uptick in demand on the back of VC investment that has ballooned from just £11.2m in 2019 to more than £300m this year.
According to research by BNP Paribas and Tech Nation, Manchester is the fastest-growing tech city in Europe, with tech companies securing almost a fourfold increase in investment between 2018 and 2019.
But Bruntwood SciTech managing director Thomas Renn is quick to caution that it is life sciences where demand and investment is focused, not pure tech.
“We have seen two years’ worth of life sciences lettings in one year, and then we have seen a drop-off in our tech lettings,” says Renn.
“It has not been a great year for tech scaling in the city or with us. We were anticipating more vacancies, but instead what we’ve seen is a massive pause of breath.”
However, with billions of pounds of VC investment being pumped into tech companies this year and no real sign of investment slowing, the need for space for growing businesses to collaborate and deliver has not disappeared.
It is perhaps, as Bruntwood’s Renn says, a pause for breath as the world reacts to this most unusual year. And perhaps, by 2021 or 2022, landlords can breathe a sigh of relief as tech tenants come flooding back.
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