Google Inc. (GOOG) will lease a seven- floor building to provide space for developers and startups near London’s “Silicon Roundabout,” boosting U.K. Prime Minister David Cameron’s plans to create a global technology hub in the east of the British capital.
Google will take on more than 25,000 square feet (2,323 square meters) of office space near Old Street until at least 2022. The company will pay about 5 million pounds ($7.8 million) over 10 years in rent, which excludes costs for refurbishment, according to an online brochure for the site.
Google, the owner of the world’s most popular search engine, will work alongside technology and media companies as the U.K. government tries to turn London into a technology center to rival Silicon Valley and make the city less dependent on financial services. The Mountain View, California-based company will retain its existing offices in central London.
“Finding a suitable building is the first major step,” David Singleton, an engineering director for Google U.K., said in a statement. “East London is already home to hundreds of innovative British startups, and has huge potential for economic growth and new jobs over the coming years.”
The U.K. government is encouraging ventures to move to “Tech City,” a four-mile-long zone stretching from Shoreditch to Stratford, the neighborhood at the heart of the 2012 Olympic Games. Part of a media center that was built for the event may be turned into a home for startups afterwards.
By moving into the area, Google will stay close to technology entrepreneurs and their inventions. Among high- profile deals this year involving startups in the area, Twitter Inc. bought micro-blogging service Tweetdeck, while online loan provider Wonga raised 73 million pounds in funding led by Oak Investment Partners.
Google may get an early look at some of the other startups in the area, said Keith Arundale, a venture-capital consultant and former director in PricewaterhouseCoopers LLP’s global technology group. “If Google’s eyeing up some acquisition targets, they’re going to bring much-needed exit opportunities. Those are a weakness in Europe compared to the U.S.”
Google, which has sponsored TechHub, a flexible work-space for startups located close to the roundabout, has seen the value of “being very physically engaged” with some of the companies in the area, said Elizabeth Varley, chief executive officer of TechHub.
For Google, “it’s a really good way to be approachable for people,” she said. “It’s less of a here’s a big company with their big headquarter office that you can’t go into unless you have an invitation.”
Google is seeking to increase the number of online applications built for its Android operating system for mobile phones and tablet computers. Android, the most popular operating software, accounted for 43.3 percent of the smartphone market in the second quarter, according to research firm Gartner Inc. Apple Inc. had an 18.2 percent share.
“People who may be interested in Google technologies or developing for Google platforms will have easier access to knowledge and resources about how to do that,” Varley said.
Rental for the building on Bonhill Street is 19.50 pounds per square foot per year, according to real-estate consulting firm Allsop. That’s well below prime rents in the City of London financial district, which are about 55 pounds a square foot. Offices in the best locations in the West End cost as much as 95 pounds, Jones Lang LaSalle Inc. estimated last month.
Technology and media companies in central London employ almost 400,000 people and accounted for 11 percent of all commercial leasing in the past five years, according to Cushman & Wakefield LLP, a real-estate broker.