Inside Edinburgh’s tech sector

Picture yourself as a budding tech entrepreneur in Edinburgh. One moment you’re a bedroom start-up with nothing more than an Excel spreadsheet, the next (well, 15 years later) you’re a trophy buy for global investors. The purchase of Skyscanner at the end of last year for £1.4bn by Chinese online travel giant Ctrip was something of a coming of age for Edinburgh’s tech sector. The travel comparison website, along with online gaming firm Fanfuel, was already something of a poster child for the city’s burgeoning tech scene. But the sale highlighted the potential of a market that is continually looking ahead to the next big thing. Quite how Edinburgh emerged as a tech hub to, if not rival London and Manchester, certainly give them a run for their bitcoins, isn’t clear, though much of the credit is given to the University of Edinburgh’s world-leading School of Informatics. Currently home to around 1,400 students (split equally between under- and post-graduates) the institution has been a prime source of talent for the city’s business community. Professor of epistemics Jon Oberlander says: “We’re not sitting on our laurels. We are directing our attention to areas including cyber security, internet of things, with the School of Design, and robotics, with Heriot Watt university.” Oberlander recognises that in some ways Edinburgh has manufactured new issues for itself. “The creation of big tech employers mean competition among the workforce increases,” he says. At least the university has a good retention rate for its graduates – only around 13% are tempted away to London. “Lifestyle is also important, so while Edinburgh may lose some staff to London and Manchester it can equally take people from those places,” says Mark Jones, director at Cushman & Wakefield. Retaining and expanding its talent base isn’t the only challenge Edinburgh faces. Providing accommodation for the tech companies that emerge from incubators and accelerators such as the city’s own Codebase and Seed Haus, respectively (see boxes) is also an issue. “Our perception is that we do OK at start-ups. What we struggle with is scale-up [ie not grade A] accommodation, which the market is not delivering,” says Paul Lawrence, Edinburgh city council’s director of place. The loss of secondary offices to other uses, common in cities across the UK, has hit Edinburgh hard. Developers suggest that the council should lead on a solution and Lawrence says that the local authority is doing just that. “We think there is a problem, so we are in dialogue with public institutions [including the council itself] to identify underutilised space,” he says. The council won’t talk specifics, but five sites could be brought forward initially, amounting to the provision of several thousand square feet of workspace. Some doubt whether, at current growth rates, this will be enough. “Edinburgh has a very compact city centre. Unfortunately it doesn’t have areas of industrial heritage it can adapt, unlike Manchester and London,” says Ben Reed, director at JLL. That means budding tech companies may be forced to look further afield, though it is not clear where they might go. “We might see them pushed out to Leith,” says Peter Fraser, associate director at GVA. “It’s an obvious place for smaller offices, especially if the tram finally gets built there.” With Leith rents currently around £10 per sq ft lower than those in the city centre, there is a a financial incentive to locate in Leith’s boho-style environment. West Edinburgh may also attract those finding it difficult to secure space in the city centre. Serviced office operator Citibase reports increased demand at its 25,000 sq ft Gyleview building on South Gyle business park. “We have seen a 50% rise in tech occupiers in the past year, meaning that one-third of the centre’s customers are now tech firms,” says Citibase chief executive Steve Jude. For large tech firms, though, the city centre is likely to remain the prime focus. The issue for developers is how far they should spec their buildings to the perceived wishes of tech occupiers. The chief executive of US semiconductor supplier Cirrus Logic, which recently moved into 100,000 sq ft at Triuva’s Quartermile 4 was surprised to find the speculatively-built space already fitted out, reports Quartermile’s managing director Paul Curran. “He thought we were crazy putting all those things in as they would strip them out. In future I think we’d hold back and not install suspended ceilings,” he says, “as even financial services occupiers are unlikely to take a category A fit-out these days.” It’s all about the (Code) Base The UK’s largest technology incubator isn’t in London or Manchester, but in the former government offices of Argyle House, central Edinburgh. Currently 93 companies occupy 45,000 sq ft at CodeBase and the business has been so successful since starting up in 2014 that it is fitting out another 7,000 sq ft to reduce its long waiting list later this year. Co-founder Stephen Coleman is now looking at expanding to other UK cities – the first outside Edinburgh, in Stirling, was announced in March. But Coleman reckons the market shouldn’t get too hung up on office supply. He says: “Availability of space is much less important than availability of advice and support from believable operators.” Sense prevails on Princes Street When digital location data provider sensewhere needed to expand from its base in Edinburgh’s southern suburbs last summer, it found that its choice of offices was limited. But one city centre property stood out as it offered a panoramic vista of Edinburgh Castle. So the company plumped for the 4,360 sq ft top floor of 108 Princes Street, taking a seven-year sublease in a building with Next on the ground floor. “We wanted a space of inspiration and Princes Street offers unparalleled appeal in terms of access, space and views. With its prominent location, we find ourselves at the very heart of Scotland’s business scene fronting its technology and innovation,” says the firm’s communications manager Anna Majek. The firm, whose potential clients include shopping centre owners and operators, employs 20 staff in the new office and is expecting that number to grow by the end of the year. Yet while a private balcony (with direct views of the Fringe and Hogmanay fireworks) is perfect for entertaining clients, the company chose not to go for the de-furbed look commonly associated with tech companies. “The decision was made to keep it neutral here, with no exposed ceilings or brickwork,” says Majek, challenging the notion that tech companies are averse to corporate-style fit-outs. Seeds planted outside city centre New accelerator Seed Haus opens its doors to its first select cohort this month, offering just five individuals the chance to make it big in tech. The company’s location in Edinburgh’s trendy eastern suburb of Leith wasn’t deliberate though, explains co-founder Calum Forsyth. “The other co-founder already had an existing business here,” he says. So Seed Haus is refurbishing workspace that will accommodate up to 50 people. However, the choice of Edinburgh was no accident. Forsyth says: “We looked across the UK to see where the optimum place to be was, and Edinburgh came out top.” Edinburgh tech stats ■ 25,109: Number of digital jobs ■ 363: Start-ups (annual average 2011-15) ■ £59,261: Average digital employee cost (advertised salary + property costs) ■ £43,900: Average employee cost (salary + property costs) ■ £513m: Digital GVA ■ 61% of start-ups say inadequate supply of highly skilled works is a challenge Source: Tech Nation 2017/JLL Seeds planted outside city centre New accelerator Seed Haus opens its doors to its first select cohort this month, offering just five individuals the chance to make it big in tech. The company’s location in Edinburgh’s trendy eastern suburb of Leith wasn’t deliberate though, explains co-founder Calum Forsyth. “The other co-founder already had an existing business here,” he says. So Seed Haus is refurbishing workspace that will accommodate up to 50 people. However, the choice of Edinburgh was no accident. Forsyth says: “We looked across the UK to see where the optimum place to be was, and Edinburgh came out top.” Mark Simmons