To many people, particularly those born outside the capital, certain areas of London have a fairy-tale or story-book association. Until you arrive, whether for work or pleasure, a visitor, or a stayer, it’s hard to imagine that certain aspects exist in real life.
‘When will you pay me?’ say the bells of Old Bailey.
‘When I grow rich,’ say the bells of Shoreditch.
This time may well have come. The Shoreditch we see today is hardly recognisable from even fifteen years ago, when commercial property rents were a fraction of those found there now.
The area is adjacent to both the eastern fringe and the City, yet is far from the latter in terms of atmosphere and history. In the 1800s, the Industrial Revolution was changing the face of the cities up and down the country, and Shoreditch became a centre for furnishing and textile manufacture. Its landscape moved even further from the grand banks and financial centre of the City nearby.
Its architecture was – and, importantly, still is – shaped by warehouses, industrial-style and functional multi-storey buildings. While some were lost in the Blitz, those that remain have become desirable and, hence, expensive.
Following a pattern seen in many cities, including New York – with its meatpacking district and Greenwich Village – creatives, artists and musicians moved into the formerly cheap and not-so-cheerful Shoreditch area, drawn by its buildings as well as its bargains. And they kept coming: ‘creative’ became the name of a sector, and burgeoned; then ‘creative’ merged with technology and became richer. Rents became higher and space scarcer, and rents grew again.
The success of the people who were moving to Shoreditch, and the success of their businesses, meant there was more money not only for rent, but to transform the ‘warehouse-style’ and loft buildings into dramatic spaces in which to live or work. These buildings became a ‘must-have’ for many entrepreneurs and start-ups.
Shoreditch’s contrast with the nearby City has worked in its favour. Today many City workers live here: close to work, but in an area that has an entirely different vibe. Boutique hotels abound, funky bars are filled post-work, and cafes are still springing up.
Retail shops are often individual rather than brand-name and art galleries could keep you occupied for days. In short, Shoreditch is one of the most desirable areas to live and work in London, and will continue to be so, particularly if its vibrant and unique nature is retained. Yet these business tenants might be paying almost seven times in rent in 2014 as they would have paid in 1999.
I [Eugene O’Sullivan, Associate Director at Morgan Pryce] can recall rents in Shoreditch as low as £6 or £7 per square foot fifteen years ago (when there was also less division between prime and non-prime…). Recent figures show prime rents in the area at £47.50 per square foot and a not-insignificant £25 per square foot for non-prime space. This represents a jump even during the last six months, as the same prime-office space could be achieved for £40 per square foot in September 2013.
The figures look all the more head-turning when considered in relation to nearby City and eastern fringe. Neither of these areas has seen much significant change in its prime and non-prime space since 2012, with prime City space up just a couple of pounds from £55 to £57.50 per square foot.
The eastern fringe properties have increased more, proportionally – from £25 to £28 – but still, it’s nothing to write home about. Shoreditch, however, in two short years, has increased its prime office-space rent from £35 to £47.50. Its non-prime space has increased in value since 2012 from £20 to £25 per square foot. But of course, in this area, prime space, the wooden-floored, big-windowed, industrial-rivets-bared space is what is in demand in Shoreditch as it encapsulates the feel and history of the area.
Benefiting from the rags to riches story of Shoreditch are, of course, the landlords who have seen both the rents and capital value of their properties rocket in less than two decades. With a more-than doubling in rents between 1999 and 2000, the transformation was swift, as well as unpredictable. Landlords who have kept hold of their property will have in recent years been reminded of those early days at the turn of the 20th/21st century, with their rents once again increasing on a monthly basis.
The area, and therefore the landlords, have benefited in parallel with the technology boom (and bust) since 1999. The ‘dotcom’ boom helped the early heady days of rent increases, with over 15,000 new technology start-up technology companies noted, while the ‘bust’ in 2004 saw rents become steadier.
However, with subsequent investment from the government specifically targeted at the technology, media and telecoms sector, including ‘Tech City’ and ‘Silicon Roundabout’ and a clever marketing plan that pretty much took care of itself, the area has gone from strength to strength as the UK economy began its recovery from the 2008 financial crisis.
Much of Shoreditch property is family-owned, having been passed down from one generation of landlords to the next, and many landlords will indeed have kept their properties over the years. And the good fortune struck again with the announcement of Crossrail, the east–west link across the city due to open in 2018 and one of the largest infrastructure projects the UK has seen.
With nearby Whitechapel station set to feature on the Crossrail line, nearby property owners – both commercial and residential – are likely to see even greater increases in their property values.
The risk is that the heart of the area could be diluted by high rents that push out smaller businesses, and that it becomes more high-end than high-street. What is certain is that, in line with the old nursery rhyme, Shoreditch has been paying its way for some time and that it is indeed now rich – but in more ways than one.
Eugene O’Sullivan, Associate Director at Morgan Pryce