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Technology rents catching up with banks as digital economy grows
[BERLIN] The gap is narrowing between the rent paid by technology-related companies and financial-services businesses in cities including San Francisco and Hong Kong as the digital economy expands.
Technology companies in San Francisco now pay the equivalent of 56 per cent of the rents per employee by financial firms, up from 42 per cent in 2008, according to a report to be published by Savills Plc on Monday. That's increased to 33 per cent from 27 per cent in Hong Kong and to 47 percent from 42 per cent globally.
"Overall tech rents are still a lot cheaper than in the financial sector, but you'll see a closure of that gap over the next 10 to 20 years," said Yolande Barnes, director of world research at Savills in London.
Financial firms from JPMorgan Chase & Co to Deutsche Bank AG cut costs in the wake of the financial crisis. Deutsche Bank in Sept 2012 said it would save an annual 300 million euros (US$335 million) by moving jobs to lower-cost locations and taking up less space. Meanwhile, demand for space that's suitable for technology workers has increased as the number of companies grows.
"There's more competition for a different type of property: smaller units with character," said Ms Barnes. Technology firms prefer mixed-use neighborhoods with low-rise buildings, such as those found in Shoreditch in London. "More people are being employed in the tech sector, more revenue is being generated and pockets are getting deeper," she said.
In London, the gap isn't closing because the city is home to a growing number of "small, creative digital-age hedge funds," that are driving up financial-industry rents.