The ‘TMT sector’ (Technology, Media and Telecommunications) has barely been out of the property press in the years since the credit crunch. TMT companies have been picking up the slack in the office occupier market, given the absence of the big ticket deals from financial services and professional occupiers. Depending on which commentator you believe (JLL included), the TMT sector has accounted for between 25% and 40% of demand for office space in Central London, over the previous five years. However, there is diverging consensus as to what constitutes a TMT company and whether this is an appropriate method of classification.
Firstly the final ‘T’ (telecommunications), which is the most easily defined of our three sectors, has been largely absent from the most recent uptick in Central London leasing activity (Telefonica’s deal at AirW1 is the notable exception), and there seems no good reason to package telecoms companies along with media and technology firms. So let’s put telecoms to one side and focus on the TM sector, which admittedly isn’t quite as catchy.
Media and technology companies have clearly been more active in the Central London office market but uncertainty surrounds which companies should fall under this grouping. There can be little doubt that News International and Ogilvy and Mather are media companies, both of which leased office space recently at The Place, London Bridge, SE1 and Sea Containers House, SE1 respectively. But what of Amazon, ASOS, Trainline, Lastminute, Expedia, Uber and others that use the internet as their primary sales channel, but lack a physical presence. In an age when all but the most ardently traditional companies have an online presence, is it right to classify these companies as ‘tech’?
Amazon is a case in point; widely classified under the catch all TMT moniker, but a look below the web interface reveals a giant of retail and logistics. Indeed Amazon’s largest property transactions in recent years have been distribution hubs, notably the leasing of large sheds in Rugeley (700,000 sq ft) and Dunfermline (1 million sq ft). And what of their competitors – Waterstones, Argos, Tesco et al, all of whom would be classified as retail.
In another example, Visa and America Express payment systems would typically be classified as ‘financial services’ but what of Worldpay, our neighbours here in JLL’s City office, who provide mobile payments systems. Technology is their enabler but they provide a financial service to business and consumers. Funding Circle, an online peer to peer lending market, is another example which straddles technology and finance. A new term has been coined for this type of company – ‘Fintech’.
Other commentators have raised this lack of clarity but TMT still persists as the property industries go-to classification. This issue was put to a panel of property experts at the recent London Real Estate Forum by Jon Neale (Head of UK Research, here at JLL and author of Digital London, which touches on this debate). The panel responses were at best inconclusive and at worst conflicting. Most telling was the fact that the term TMT isn’t used in and around the Old Street roundabout, in ‘tech city’, where many TMT companies are located.
This blog doesn’t attempt to offer a solution, rather to continue the debate. All industries are going through a technology evolution, including JLL and the wider property industry. With technology being embraced across the board, aren’t we all, at least in part, ‘TMT’ companies?