Barely a day passes currently without news regarding one of the big international tech giants making a change to their strategy. In particular we have seen much reported around the reduction in headcount within the sector. However, while significant numbers are mentioned, it should be remembered that these are only a small percentage of the total number of people that continue to be employed in tech globally, and that much is due to some over-hiring by some tech companies during the unexpected boom they experienced during the Covid-19 pandemic. Overall, demand for good tech talent remains healthy. 

As the tech monoliths focus less on growth and more on cash generation, to what extent are their strategy changes impacting UK regional office demand? While announcements by the big names may grab headlines, are they distracting from some more positive growth by homegrown tech companies? 

Historically, the regional UK markets have looked to London and Dublin with envy as they have attracted the big tech occupier requirements, and hoped that the ripple effect would see continued growth in the wider tech, media and technology (TMT) sector translate to more occupational demand in cities such as Manchester, Birmingham and Glasgow. 

To a large extent this has happened: TMT has increasingly represented a greater piece of the office take up pie, being the most active in four of the last five years, totalling 4.5 million sq ft of regional city take-up and accounting for 20% of the overall total.  

TMT take up, particularly in the UK regional markets, has been diverse and organically grown over the last decade and this has often been characterised by smaller deals. 71% of TMT deals in the ‘Big 6’ UK regional cities were for deals under 5,000 sq ft over the last five years, indicating that activity is likely to have been driven largely by tech start-ups and SMEs, rather than the household tech names.

That’s not to say that there aren’t some major tech players emerging across the country. Key UK regional cities are witnessing considerable organic growth with nine out of the 29 tech ‘unicorns’ created in 2021/22 being registered outside London, including Interactive Investor in Glasgow and Vertical Aerospace in Bristol, suggesting that the growth in tech in the regions will continue to perform strongly in the next five years. However, we need to be mindful that the golden years of venture capital (VC) investment across many start-up sectors is starting to wane. Q1 2023 will see a new normal globally within the VC markets: although performance is still going to be relatively strong, a slowdown is expected. 

The depth of the tech industry is broad and during the post-lockdown period there has been a much greater appetite from technology companies within regional cities to acquire additional office floorspace. Our data shows that technology companies relocating in the Big 6 increased their total office space occupied by 77% in 2021 and H1 2022 compared to their previous office space commitment.

The organic growth of these regional tech companies relies on the very best talent being present – and this fight for talent continues. Many companies are still hiring tech workers, albeit at slower rates than they used to, jumping at the chance to attract this new wave of talent while using their real estate as a method of portraying a progressive, contemporary and modern image. In many ways they want to act like these fabled, fast growing companies with their colleagues proudly posting images of their workspace on Instagram.   

The breadth and depth of tech company take-up in UK regional cities shows that the industry still has plenty of potential to grow and mature, which makes for positive reading for developers, landlords and UK Plc alike.

Further information

Contact Clare Bailey

Spotlight: UK Regional Offices – Autumn 2022