London's Olympic Park has finally opened its doors to the city's tech entrepreneurs — more than three years after the plans were first announced.
The new tech accelerator, Here East, is based at the site of the former Olympic broadcast center used for the 2012 games. It's seeking to fill its 111,500-square-meter (1.2 million-square-foot) space with digital-media startups and product-design companies. These will work alongside small innovation facilities run by multinationals.
U.K. Prime Minister David Cameron hopes the tech startups can help secure a positive legacy for east London. Cities chosen to host the Olympics reap the global spotlight and a wave of tourism, but they risk being left with unwanted infrastructure built for an event that lasts barely two weeks. Russia needs to decide what to do with a bunch of cellular towers in Sochi, and find a use for the Fisht Olympic Stadium and other new buildings. Nobody wants to end up like Greece, which is still sitting on 6.2 million square meters of unused real estate from the 2004 Olympics.
To what extent Here East can help the U.K. balance its books remains to be seen, but it isn't the only tech hub with question marks hanging over it. In 2010, back when the Olympic Park was first earmarked for a tech accelerator, the U.K. government was championing the creativity and energy of London's then-emerging tech industry at nearby Silicon Roundabout.
Some entrepreneurs now contend that the cluster responsible for kick-starting London's tech love-in is struggling to survive.
Many of the occupants of Silicon Roundabout are faced with a problem encountered by millions of ordinary Londoners: paying the bills. Soaring real estate value in the cluster has fueled a jump in the commercial property rents many startups have to pay. A report by property consultant Carter Jonas found that commercial rent rose between 13.3 percent and 15.8 percent last year, and is likely to jump by another 5 percent to 9 percent in 2014.
The demand for workspace has outstripped the inevitably limited supply that Shoreditch, a densely packed central London district, can offer. All of this is happening before any of the 1,300 startups crammed into the area's office spaces have managed to achieve a billion-dollar initial public offering or buyout.
But according to James Governor, the joint founder of co-working space provider Shoreditch Works, Silicon Roundabout is far from dying — it's just evolving.
"Don't tell me there's no more creative people in Shoreditch; that's just silly," Governor says. "But the appeal of Silicon Roundabout has shifted. It's no longer the low rent. It's the extreme density of creative, like-minded people."
Shoreditch has recently attracted the likes of Google and Cisco Systems. Governor says that in the 1990s, the district was full of artists, with a social scene comprised of "three bars and a load of strip clubs."
Among those who could lose out in this evolution is Matt Webb, a local entrepreneur who was the first to push the U.K.'s coalition government to support and promote Silicon Roundabout. As a stalwart of the initiative, Webb's cloud services company Berg exploited local connections to get face-to-face meetings with investors. The startup found its lawyer through a neighbor. Berg's current workspace is located in a building set for demolition this year, and Webb has a choice to make.
"The price of office units has doubled, and crucially, short-term leases are harder to find," Webb says. "It would be great to be able to stick around and benefit from the network here, but it's going to be expensive. Is it worth it? I'm not sure."
One of the area's newer startups offers a different insight and a glimpse of the commercial direction in which the area may be headed. Arachnys, which makes corporate software used by investment banks and law firms, relocated to Shoreditch two years ago, drawn by the local talent that the company couldn't find in its original base in Cambridge. Arachnys CEO David Buxton may not have the kind of buzzy startup often associated with Silicon Roundabout, but he says the rising office rents in the area aren't keeping him up at night.
"Cheap rent is meaningful for people that aren't running successful businesses," Buxton says. "It's trivial compared to your staff costs. We spend about 25 times on staff what we do on rent."
Still, for many entrepreneurs, every pound counts. A startup community positioned next to one of the biggest financial hubs in the world is a planning paradox typical of London, where public housing often rubs shoulders with multi-million-pound Victorian dwellings. If prices continue to rise, Tech City is at risk of becoming an annex to the city of London. Maybe Here East has come just in time.