MAGAZINE GUEST COMMENTARY: Where do tech workers want to work?

As we all know, 2018 was a year of significant change for commercial real estate. In the face of political and economic uncertainty across the continent, the volume of investments in the office sector increased by 6.9% in the first half alone, whilst vacancy rates remained low and prime rents stable. However, the definition of what is considered ‘managed office space’ continued to shift, causing turbulence for many commercial real estate developers and motivating many to accelerate the development of new business models.

It has now become a truism that the millennial technology worker does not just want to work in an office, but a space that complements their lifestyle. In 2018, the number of workers specifying that they work in the technology sector grew by 7.3% in Germany, 4% in France and 3.3% in the UK, so this trend is expected to accelerate, providing more opportunities for investors if you know what to look for. As a company that provides serviced workspaces for scale-up technology companies, we have got to know this segment well.

Thankfully, core principles of investing in commercial property still stand. Location is still everything but investors now need to spot spaces that will appeal culturally to businesses and the talent they want to attract. Businesses are in a war for talent and need to situate themselves in areas that will be culturally attractive to young developers, product designers and tech specialists. Knowing this, and knowing the cities and districts where tech workers want to be, is a great starting point for spotting opportunities in 2019.

Four European cities
I would single out locations within four Europe cities; Copenhagen, Berlin, Paris, and London. (see boxes). Successful spaces in these locations all have one thing in common: they are sensitive to the local ecosystem. That means not putting faceless office fronts into diverse, historical areas, and promoting local traders rather than pushing them out. For investors, this is not just a ‘nice to have’, it is a must for attracting the kinds of workers that will allow businesses to rent for the long term.

One only has to look at Amazon’s insensitive HQ2 search, which led to massive protests in Queens, New York, to see why local communities should be included from the start. In fact, Google famously pulled out of Kreuzberg in Berlin after opposition from local residents who were concerned about the long-term impact of rising rents and gentrification.

Knowing this, and knowing the characteristics of local property markets in detail, provides the basis for a successful investment strategy that can be adapted no matter what uncertainty comes at us in 2019.

Four hot spots for technology workers in European cities

1. Valby and Vesterbro/Kongens Enghave, Copenhagen
Backed by the Danish government’s digital agenda and with great access to accelerators (including Danish Accelerate, the most active Nordic accelerator) Copenhagen ranks seventh on the European Digital City index of European cities by number of tech companies scaling from start-up to established players. Perhaps it's the fact that Denmark is frequently ranked as the happiest country on earth, or the talent produced by the five leading universities in the city, that means companies like Skype and Just Eat want to be based there. With great access to funding, we expect Copenhagen to continue to punch above its weight and attract top tech talent in 2019. Investors should look at developments close to the expanding Cityringen metro system.

2. Kreuzberg, Berlin
This trendy neighbourhood in East Berlin has traditionally been populated by artists and immigrants. Whilst the area is becoming more gentrified now, it still retains its revolutionary streak, marking it out as a key tech hub for the capital. Berlin itself is cosmopolitan in nature and very attractive to high-skilled foreign workers. One fifth of its population and 15% of all company founders are foreign. With this mix, it's only a matter of time before Berlin’s startups mature into larger-scale success stories. Indeed, companies like N26 and Zalando, which have established themselves as international players, will attract others with similar ambitions. This, combined with Berlin’s reasonable cost of living, will continue to attract a skilled, international workforce. Kreuzberg then, should be a top target for investors in 2019 if it isn’t already.

3. 3rd arrondissement, Paris
Paris is working hard to make itself more attractive to fast-growing technology businesses. Indeed, Emmanuel Macron has pledged to make France a “nation of unicorns” and has made changes including a new visa for international technology workers and investors. Conveniently located at the heart of Europe, the capital has opened several high profile tech spaces in recent years, including Station F (Europe’s largest), whilst the 42 coding school has attracted international recognition. Commercial real estate investors should consider the 3rd arrondissement, an area packed with independent coffee shops, bars, culture and graffiti, making it popular with millenials and creatives.

4. Shoreditch, London
Long established as an area for hip young businesses, East London’s millennial capital may seem like an obvious choice. But there is one characteristic that means this district is only going to cement its position as a no-brainer for growing tech companies: access to VC capital. Other than San-Francisco, East London companies have better access to early-stage VC funds than those in any other city, as well as close proximity to top global universities, which provide a ready supply of talent. And though demand is high, rents are not rising too quickly to put off tech companies from locating here. This is why, having started our journey with five spaces, we’re continuing to invest in the area, with a new Shoreditch South location.

David Galsworthy is CEO and Co-founder of Techspace, London’s first curated coworking space for innovation and scaleup businesses.