London overtakes San Francisco as the most expensive city for tech start-ups

‘London needs to be more affordable for tech firms if it wants a home-grown Google or Twitter,’ say estate agents

PUBLISHED : Thursday, 15 September, 2016, 4:22pm
UPDATED : Thursday, 15 September, 2016, 4:22pm

London has been named as the most expensive city in the world for technology start-ups to open offices, trumping New York and San Francisco, potentially stifling its ability to create the next Google or Twitter, according to a new report.

Estate agent Knight Frank looked at the cost of leasing and fitting-out 600 square foot of office space in tech and creative districts in the world’s leading cities.

Start-ups looking at London’s Shoreditch area, a hotbed of tech start-ups, will have to fork out US$66,706 per year. This is followed by Brooklyn in New York, which costs US$62,736 on average, and Mid-Market in San Francisco, which will set start-ups back by US$61,680 a year.

The first, second and ninth arrondissements - or districts - in Paris (US$57,426) and the Seaport District in Boston (US$50,700) come in fourth and fifth place.

Knight Franks’ analysis showed that emerging tech and digital districts such as as ‘Silicon Docks’ in Dublin and The Domain in Austin offer lower start-up costs at US$47,345 and US$35,280 respectively, and might be a cheaper alternative for start-ups.

But there could be some hope for start-ups looking to set up shop in London, New York or San Francisco: Co-working spaces. These are buildings run by companies like WeWork for example, that let companies rent small offices or even desks.

In London’s Shoreditch area, the cost of occupying four desks in a co-working space is US$28,933 per annum. Knight Frank says this is a US$37,773 difference from renting traditional office space. In San Francisco’s Mid-Market district, the annual saving would be US$37,680.

“As we head towards Brexit, tech start-ups are the sort of firms the UK will be looking to for future growth. So it is disappointing to discover London is such an expensive place for them to rent business space, at least if they want their own offices,” James Roberts, chief economist at Knight Frank, said in an emailed statement.

“Collaborative offices are consequently playing a vital role in offering affordable business space, but for start-ups to move to stage two as companies, they will ultimately need their own offices. London needs to be more affordable for tech firms if it wants a home-grown Google or Twitter.”