Twenty years ago, the City trading floor of the London International Financial Futures and Options Exchange was jammed with traders in bright jackets buying and selling millions of derivatives contracts.
Now, what was once a key institution in the Square Mile is run from a bank of servers in Basildon, and 50,000 square feet of the former trading floor is about to be taken over by the fast-growing digital food delivery start-up, Deliveroo.
The arrival of a three-year-old takeaway app in the home of high finance is one sign of a diversification strategy pursued by the City since the 2008 financial crisis. “The City is definitely going through a reinvention,” says Simon Prichard, partner at Gerald Eve, the property advisers.
Digitisation ended the life of the Liffe trading floor — which is now part of Intercontinental Exchange — and most other “open outcry” trading pits. Then, as banks retrenched after the 2008 financial crisis, the City intensified its attempts to attract a greater spread of businesses, in part by changing its image as an area that shut down in the evening when stockbrokers and traders went home. It encouraged retailers, restaurants and bar groups to set up, and developers to move beyond glass monoliths tailored to financial giants.
More recently, the City has been pushing to boost digital connectivity, working to improve broadband speeds and costs for small businesses and to launch a free WiFi service.
“If Deliveroo had existed five years ago, they wouldn’t have looked here,” says Nick Pearce, leasing manager at Blackstone Property Management, a division of the US private equity investors, which owns the Cannon Bridge building the tech group is moving into.
Changing times: space in the City
● Before: Liffe trading floor in the 1990s, above
● After: Transformed offices for Deliveroo, below
While the Square Mile has not been the focus of large-scale tech groups — Google, Facebook and Apple have taken spaces elsewhere in London — it has experienced a steady inflow from sectors other than finance.
The hotel booking service, Booking.com, leased offices in the Monument Building this year, while International Gaming Technology, the telecoms group VimpelCom and the share registrar Equiniti took smaller City offices in 2016, according to Cushman & Wakefield. Amazon, which is developing a new headquarters just outside the City at Principal Place, temporarily leased almost 50,000 square feet in Beaufort House near Aldgate.
In a further sign of diversification, the financial news and data company Bloomberg and publishers Hachette are also moving further into the City.
“[Deliveroo] points to a constant level of activity from the tech sector, rather than a booming level of activity,” says Chris Lewis, real estate partner at Deloitte.
Diversification has enabled City jobs growth to continue. “Since 2007 we have actually seen a fall in the number of banking jobs in the City, yet a large increase in employment overall,” says Chris Hayward, chairman of planning at the City of London Corporation.
Much of that growth has been in financial and professional services, but technology accounted for 37,000 City jobs in 2015, up 55 per cent from five years earlier, official figures show. Tech companies’ share of new office take-up increased each year from 2012 to 2015, while co-working spaces such as WeWork, which cater in part to start-ups, have also increased, according to Cushman & Wakefield.
For the growing “fintech” industry, proximity to financial services groups has been one lure; Monitise, a mobile payments app, is based near Bank underground station, where it is surrounded by commercial lenders.
Another draw has been rents, which have not grown as fast in the City as around London’s “silicon roundabout” in Shoreditch and in other up-and-coming areas.
Rents in the centre of the City stood at an annual average cost of £70 per square foot in the second quarter of 2016; rents in Shoreditch had almost drawn level at £66.50, after more than doubling in five years, according to Knight Frank. In Euston and King’s Cross, rents overtook the City in 2012.
Mr Pearce says the Cannon Bridge office is “cost-competitive” for Deliveroo. Construction staff are now busy transforming the former deal pit to suit a tech company — removing suspended ceilings to expose shining ducts and brickwork. Deliveroo is considering installing a central conference area made to look like a football pitch.
Change is also afoot in other City offices, says Mr Prichard. “Banks are looking to attract the same kids that are working for Google, and those kids aren’t going to work in a big silver box,” he says. “They are looking for sexy space.”
Before Deliveroo came on board, Blackstone had already decided to redevelop the 19th-century building that housed the Liffe trading floor with exposed brick, breakout areas and high ceilings, anticipating that a more relaxed environment would appeal to the broader market.
Attracting tech start-ups has its hazards. The mobile ecommerce company Powa Technologies, which had offices in Heron Tower in the City, collapsed into bankruptcy this year. While young companies are often required to provide deposits or bank guarantees, they may not offer the same security of long-term income to a landlord as a big financial group.
But the UK’s vote to leave the EU means the City is expected to continue with its push to diversify. Vacancy rates for central London offices have risen since the vote, according to Gerald Eve.
Elaine Rossall, head of research for London markets at Cushman & Wakefield, says: “Banks were consolidating and rationalising, in terms of their property strategy even before the Brexit vote. Brexit has led to a consolidation of those trends, and so growth going forward may be from the tech sector.”