Data shows that the number of digital firms in just Sheffield and Leeds has increased by a third in nearly five years.
The Yorkshire Office Market Review 2017, published by property consultants Knight Frank, cited massive brands such as SkyBet, WANDisco, Rockstar Gaming and Plusnet as being key to the growth but also mentioned smaller, fast-growth firms, as helping to expand the sector, with as much of a quarter of all office space in Leeds and Sheffield now taken up with firms involved in technology, media and telecoms.
However, it also sounded a note of caution by warning that a lack of supply in office space was suppressing this growth and investment potential.
The review was launched at Aspire in Leeds to an audience of occupiers, investors and developers.
Eamon Fox, partner with Knight Frank in Leeds and leader of the office agency team, said: “From a property market perspective, the rise of the TMT sector is supporting demand for office space.
“In Sheffield and Leeds, TMT firms account for 20 per cent-25 per cent of space let between January 2016 and March 2017. Well-known brands such as SkyBet, WANdisco, Rockstar Gaming and Plusnet all have offices in either Leeds or Sheffield. “However, the smaller, fast growth companies have been most active with 27 per cent of TMT deals across the two major cities below 5,000 sq ft.
“Furthermore, the tech umbrella is broadening. Organisations whose principal business is not within the technology realm are taking space to support a growing digital arm. The emergence of ‘digital transformation teams’ is increasing aimed at aligning companies from traditional banking to the public sector with the digital age.”
Global and national firms such as Asda Walmart, DLA Piper, Lloyds, BAE Systems and the NHS all have technology operations within the region.
With both primary and secondary technology streams growing, office demand to support digitally-based activities will continue to rise in tandem, added Mr Fox.
Regarding the low supply of offices in Leeds and Sheffield, Knight Frank said volumes remained on par with the long-term trend in 2016 reaching £175m by year-end.
Henrie Westlake, head of investment at Knight Frank in Yorkshire, said: “A further £34.7m of office stock sold in the first quarter of 2017, consistent with the 10-year quarterly average. Although the recent level of investment suggests steady levels of activity, volumes have largely been suppressed by a lack of opportunity in the market, particularly prime assets.
“As such, secondary assets are gaining greater attention, predominantly where active management adds value.”
He added that overseas demand, particularly for prime assets, remains strong in Leeds driven by a favourable exchange rate.
Meanwhile, Peter Whiteley, head of the Sheffield office, said that quarter one of 2017 saw the highest level of occupier take-up in two years, with 33 occupier deals completing.
Foreign investment accounted for 61 per cent of turnover with the £68m spent the highest level of overseas investment into Sheffield offices on record.