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The Importance of Tech Hubs

GCS chose to open our first American office in Brooklyn, New York for a very specific reason - because it has become a hotbed for technology.

Given this market will be GCS America's initial focus, it makes sense to be near where a huge percentage of market activity will be happening. The Brooklyn Tech Triangle is a great example of a recently developed Tech Hub but it's not the only one - Dublin's Silicon Docks, East London's Silicon Roundabout and Croydon Tech City all play home to established tech companies and SMEs.

However, numerous technology companies converging on the same area is not a new thing. The earliest example of a tech hub - California's Silicon Valley - is still the most prominent today and several hub regions emerged in the UK during the tech revolution of the 90s. The Thames Valley became the place to be for telecomms companies and Cambridge played home to numerous start-ups. It's a tried and tested formula - but why do these hubs pop up whenever there is a noticeable boost within the technology industry?

One of the key reasons is because it makes recruitment more efficient.

Given that there are many people with appropriate skillsets already working locally, providing a client is prepared to offer a competitive deal, they will have a good resource pool from which to choose. Another reason is that the offices often require little change. Due to the fast moving nature of the industry, smaller companies often expand quickly and require bigger offices. The office they leave behind has been serving a tech company and, as such, is laid out in the way that makes it very easy for another tech company to plug in and get started.

The same holds true at all sizes of company; a medium size company looking to expand will get the most productive move from shifting into a building that has been recently vacated by a large tech company which has moved to another region or country.

Where there is success, there is also inevitably failure and some start-ups will fall apart - leaving this fit-for-purpose office space open at a good price.

There is, of course, a down side - where there are competitors, there is competition. Having businesses that operate in the same sector a stone's throw away means that staff poaching is a guarantee. Companies who want to hold on to their staff need to maximise engagement and make sure they give their talent no reason to want to join their competitor. Ironically, it is that very point that can bring about the collapse of a tech hub.

This competition can lead to prices skyrocketing for talent and, if they reach a point where it becomes unrealistic, companies may relocate in order to reduce headcount cost. Increased interest in a region also damages the worker.

If an area is perceived as "hot", property costs shoot up - sometimes defeating the purpose of living in a higher earning area. As with any ecosystem, it's about balance. If talent competition drives the prices too high, less employers will stay in the area, leading to less available jobs and a drastic drop in pay levels and it's not unheard of for a formerly vibrant tech hub to quickly deteriorate.

This is something to bear in mind for anybody who works in a tech hub - look after the area and all can prosper but trying to take an unreasonable advantage of the situation can be the short term gain that causes a long term loss.