An overview of the commercial property market in London's East End

Over the past ten years, growth and innovation have become the distinctive features of the commercial property market in Old Street and Shoreditch. Here we provide a snapshot of the market in these two successful areas, as well as some useful information on one of East London's most promising commercial real estate locations.

Silicon Roundabout

London's Silicon Roundabout barely needs an introduction. Prospective tenants and investors alike are very familiar with the advantages of this prime location, renowned for its creative energy and state-of-the-art infrastructure. World-famous tenants include tech and retail giants like Google, Amazon, and Cisco.

According to a recent research report published by UYH Hacker Young, the Silicon Roundabout is the UK's most favourable location for startups. During 2014, more than 15,600 new business ventures were set up in this area. Office space is in high demand in this neighbourhood, with the most popular locations being around Rivington Street and Great Eastern Street. As demand outstrips supply, the development pipeline continues to expand. Five new office developments began to be built in this area between April and October 2014 alone. More recently, the commercial property market in Silicon Roundabout has witnessed a rise in the demand for flexible offices and co-working space, as these are convenient and affordable solutions for small businesses that are just getting started but want to benefit from being based in an established location.

The occupier profile consists of a mix of companies in sectors like financial services (which account for 32 per cent of all companies based in the area) and information technology (24 per cent). However, the ever-rising rents are narrowing down the range of prospective tenants to companies in high-value industry sectors like software development and digital media. Individual entrepreneurs and owners of small-sized business are finding it increasingly difficult to establish themselves in this area, where rental values have doubled in the past three years. Currently, average office rental values range between £42 and £55 per square foot, but can be as high as £60/sq ft once service charges are included.

Shoreditch

Thanks to its excellent transport links, proximity to central London, and thriving business environment, Shoreditch has gone from being an emerging business district to an established and highly desirable office location. Between 2013 and 2014, this area saw a staggering 148 per cent increase in workstation take-up rates despite the rather elevated rental costs. In fact, and along with other Northern City fringe locations, Shoreditch has experienced the most dramatic levels of rental growth, reaching price increases of nearly 16 per cent. As of January 2015, average rental prices for office floor space were in the region of £58/sq ft. Driven by high demand, Shoreditch's large warehouses are being converted into office space that is particularly suitable for media and creative companies. Here, workstation costs average £290 per calendar month.

East End

Rising rents in Old Street and Shoreditch are prompting prospective occupiers to look elsewhere for more affordable rents. The E1 postcode and London's East End are emerging office markets, particularly in up-and-coming business areas like Mile End and Spitalfields. Office space costs in these neighbourhoods currently range between £30 and £42/sq ft.

Office occupiers in the East End have a distinct profile, as they include more than just tech-related businesses. Over the past 12 months, fashion startups have mushroomed in this part of London, capitalising on the British capital's reputation as a trend-setting metropolis and attracting millions of pounds in funding. This is the case of successful East London-based startups like Farfetch, Thread, Wool and the Gang, and List, which together have received more than £89 million in seed funding. Outside of the office market, independent retailers and micro-manufacturing businesses are driving growth in the East End's commercial property market.