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Tech and telecoms take-up outstrips banking and finance

CBRE’s report shows that the T&T sector is now driving leasing activity across Europe. Dublin and now London are established as Western Europe’s tech hubs, with Berlin, Munich and Hamburg seeing increased take-up by T&T companies. In Eastern Europe, a handful of markets are emerging as popular destinations for companies in the sector, including Warsaw and Moscow, where a spike in T&T leasing activity has been evident over the past 18 months.

In the first half of 2012, T&T companies accounted for a quarter of all take-up in Dublin, the highest proportion of any European market. A number of high profile tech companies have taken space there this year, including BskyB, Dell and LinkedIn, which follow the investment by Google in the city in 2011. This activity continues a trend which has been evident since 2008, when 17% of leasing activity in Dublin was undertaken by companies in the T&T sector. The establishment of Dublin as a tech hub is largely attributed to the relatively low corporation tax rate in Ireland (12.5%) and the availability of a young, skilled and English speaking workforce.

The Europe-wide trend of tech companies replacing banking and finance as the key driver of leasing activity is most evident in London. Over the first half of 2012, T&T companies accounted for 22% of take-up across all London submarkets, compared to 10% in 2011 and an average of 5% between 2007 and 2010.

The West End has traditionally been the home for companies in this sector, but the combination of high rents and lack of suitable space, has seen T&T occupiers taking space across the city, at alternative locations such as Silicon Roundabout and Tech City, the Government-endorsed zone for tech, media and telecoms companies providing the high quality flexible accommodation these occupiers demand.

Berlin, Munich and Hamburg are emerging as popular destinations, with Berlin attracting Amazon, Groupon and Rocket Internet in the past 18 months, and so far this year T&T companies have accounted for 12% of take-up. Munich has seen a spike in take-up, with T&T occupiers accounting for 23% of activity in H1. Meanwhile in Hamburg the equivalent figure is 18%, almost double the proportion in 2011. The emergence of three fledgling tech hubs in Germany can be partly explained by the country’s robust economy and favourable conditions for SMEs. In addition, cities such as Berlin host a number of research institutes meaning there is a large skilled workforce available and it is renowned for its young and creative cultural scene, all factors favourable for T&T occupiers.

The trend is not confined to Western Europe, with a number of cities in Eastern Europe reporting an increase in take-up by T&T companies. Two of the largest transactions across Europe in 2011 involved T&T occupiers in Moscow, with Mail.RU taking 29,900 sq m, and Kapersky Lab taking 29,800 sq m. These deals mean that T&T companies accounted for 13% of activity in 2011. CBRE identifies Warsaw as another fast-emerging tech hub in Eastern Europe. Since 2010, T&T companies have accounted for over 15% of leasing activity in the city. CBRE believe that the skilled IT labour  pools  has become a key selling point for CEE markets which has seen companies base operations where they did not have presence 5-10 years ago.

Simon Ford, Senior Director, Global Corporate Services, CBRE, said: "Much has been made of the increase in take-up by tech companies in London, at a time when we have seen a number banking and finance organisations reduce their real estate portfolios, largely due to the particularly tough conditions they are facing. It is clear that this trend is not confined to London, and is now evident across a host of European markets."

Ford added: "The tech sector itself has evolved and expanded rapidly in the past few years. The new breed of tech companies are typically lean, fast-growing and so are expanding their real estate portfolios in order to ensure access to talent, and to enable them to collaborate with companies in the same field. The more mature tech companies, meanwhile, are focused more on portfolio optimisation and driving efficiencies, so on the whole are less active in terms of taking space. The catalyst for the larger companies to increase their footprint will be mergers and acquisitions, and many analysts expect there to be significant consolidation in the market over the next 12 months."

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