Tech start-ups face the highest costs in London, New York and San Francisco, while emerging districts – such as Silicon Docks in Dublin, Ireland, and The Domain in Austin, Texas – offer lower start-up costs.
New research from Knight Frank, as part of its 2017 Global Cities Report, examined the start-up costs of leasing and fitting out 600 sq ft of office space in the tech and creative districts of the world’s leading cities.
The report found that intense demand for space in Shoreditch, London, has seen start-up costs soar. Knight Frank calculated that 600 sq ft of office space in Shoreditch costs $66,706 per year – the highest of any creative district in the world.
‘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’
– JAMES ROBERTS, CHIEF ECONOMIST, KNIGHT FRANK
This is followed by Brooklyn in New York ($62,736), Mid-Market in San Francisco ($61,680), the first, second and ninth arrondissements in Paris ($57,426) and the Seaport District in Boston ($50,700).
Emerging tech and digital districts, such as ‘Silicon Docks’ in Dublin and The Domain in Austin, offer lower start-up costs at $47,345 and $35,280, respectively.
Similarly, South Lake Union in Seattle, where Microsoft and Amazon have a large presence, also offers affordable office space for start-ups, at $33,600.
“As we head towards Brexit, tech start-ups are the sort of firms the UK will be looking to for future growth,” said James Roberts, chief economist at Knight Frank, “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.
“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.”
Co-working space is a key differentiator
Knight Frank’s analysis also reveals, however, that Shoreditch offers the greatest cost saving for tech businesses that opt to locate in co-working spaces.
The cost of occupying four desks in a co-working space in Shoreditch is $28,933 per annum, a saving of $37,773, or 57pc, versus traditional office space.
It is followed by San Francisco’s Mid-Market district, where the annual saving would be $37,680, and Boston, where co-working provides a $36,150 discount on the cost of traditional office space.
The cost differential is less pronounced in emerging tech and creative districts, such as those areas in Austin and Seattle, where companies would pay less than $10,000 per annum more for office space than they would for co-working space.
“This study illustrates that co-working has an important role to play in supporting the next generation of innovative tech companies early in their lifecycle,” James Nicholson, a partner at Knight Frank Tech explained.
“These businesses are highly mobile, and mature markets such as Shoreditch and Brooklyn – having worked so hard to cultivate tech clusters – risk being overtaken by other locations if they cannot provide affordable workspace.”
Silicon Docks image via Shutterstock