How run-down King’s Cross became Europe’s tech powerhouse

In the next few weeks, the first of 7,000 Google employees will finally move into the technology giant’s warship-sized new offices in London’s King’s Cross.

The one-million-square-foot “landscraper” building, as long as the Shard is tall, has been a long time coming.

First expected to open in 2016, the project has been beset by delays and redesigns, the pandemic and – last summer – foxes making their home in the building’s expansive roof garden.

But its eventual opening is, in a way, well timed. The new office, when it opens this summer, will cement King’s Cross’s status as the nucleus of Europe’s technology industry and complete the revival of what was once an embarrassing corner of central London.

Last week, OpenAI and Anthropic, America’s two top artificial intelligence labs, announced plans to open new offices in the area with space for a combined 1,300 staff. In the former’s case, it came just days after it had paused a separate data centre development in the north of England.

The area is also home to some of Britain’s top AI companies, including driverless car company Wayve and AI video firm Synthesia. If you are looking for the home of “Londonmaxxing”, the boosterish term for talking up the capital’s economic prospects, it is surely here.

Saul Klein, a veteran venture capital investor who runs investment firm Phoenix Court, calls the area the “new Square Mile”. He says it is home to the greatest concentration of tech companies outside Silicon Valley or Beijing.

“When you look at the talent density in science, technology and the creative industries, there’s literally nowhere else like this on the planet,” says Klein.

Successive British governments have spent years looking for ways to replicate the success of America’s West Coast.

David Cameron and his aides attempted to incubate a cluster of start-ups in east London and brand the area “tech city”. Rishi Sunak injected taxpayer cash into start-ups to address a chasmic funding difference compared with American tech firms.

Yet, for years, London lacked the crucial density of tech companies and investors in one place that has characterised Silicon Valley.

That has changed, as the parcel of land around King’s Cross and Euston known as “the Knowledge Quarter” makes clear.

“The power of places like Palo Alto or Sunnyvale [in Silicon Valley] is that you would walk out and grab a coffee and meet the top engineers from 10 other companies,” says Rodolfo Rosini, of semiconductor company Vaire Computing. “Having deep tech and AI [all] in King’s Cross is really important.”

Rosini says he “used to go clubbing 25 years ago in the area and my god, it was a dump”.

“I remember there were areas without any public lighting – I mean, it was great, but there is no comparison with the amount of wealth that area will create for the country in the next 25,” he says.

It is not the first time King’s Cross has gone through a reinvention.

The area – named after a now-demolished monument to the unpopular George IV – became an important industrial logistics hub thanks to its cluster of three major railway stations – King’s Cross, St Pancras and Euston – and the Regent’s Canal.

As Britain suffered a postwar industrial decline, King’s Cross gradually deteriorated.

By the 1980s, it was notorious for drugs, illegal raves and prostitution. A fire at the railway station in 1987, which killed 31 people after a lit match was dropped on a wooden escalator, seemed to serve as tragic proof of its demise.

However, by 1994, the seeds of revival were planted when the government announced that Eurostar’s British terminal would move from Waterloo to St Pancras. In 2000, property developer Argent was appointed to remake the area.

“We had to imagine quite a lot,” says Roger Madelin, the company’s former chief executive. “It still suffered the huge stigma of 150 years of the industry, pollution, prostitution and drugs. It used to be a joke.”

Developers were wary of Google at first. Madelin says Argent was initially in discussions with Yahoo, which seemed a less risky prospect: “Everyone was quite sceptical about which one of these new dotcom companies was going to have longevity.”

But by 2011, when Google’s board visited London to scout new sites, multiple developers were competing for its attention.

Madelin says the tech giant’s directors – accompanied by Matt Brittin, then Google’s UK boss – arrived late for the presentation and said they were short on time.

When Madelin attempted to paint a picture of the area’s potential redesign as a dining and shopping hub, Brittin cut him off, saying: “Roger, we haven’t got long and we’re only interested in offices.”

“I said to him, ‘Well, if you’re only interested in offices, you might as well F off’,” Madelin recalls.

“The room did go a bit quiet but they were there three hours later. At the end of the day, there wasn’t another location where they could get a million square feet in one building.”

Google ultimately needed to find space in London – a city which has long been Europe’s hub for tech start-ups, investors and US giants’ international offices.

In the first quarter of the year, UK start-ups raised £5.7bn, according to HSBC and Dealroom. This was up 60pc on a year ago and accounted for more than 40pc of Europe’s total.

However, technology companies and their investors have typically been dispersed all across the sprawling city: venture capital in Mayfair, scrappy entrepreneurs pushed ever-eastward by rising rents and American giants in Soho.

This contrasts with Silicon Valley, where microhubs such as San Francisco’s South Park and Palo Alto’s University Avenue became Petri dishes for new tech companies.

Recently, King’s Cross has started to look more like these areas.

One early King’s Cross tenant was DeepMind, the British AI start-up founded by Sir Demis Hassabis, a computer scientist. It’s now owned by Google.

Sir Demis resisted pressure from investors to move to the US and ignored Silicon Roundabout, seeking to base the company near University College London.

The likes of Meta, OpenAI and Anthropic setting up offices in the area has been in part motivated by a desire to prise engineers away from DeepMind without them having to change their commute.

Cambridge is a 45-minute train away and Eurostar offers connections to the Continent, meaning companies basing themselves in the area are also able to pluck star engineers from outside London.

For its part, Google has made DeepMind central to its new offices, named “Platform 37”. The name is a reference to the AI lab’s breakout moment in 2016, when it defeated the world champion at the ancient board game Go with a particularly unique 37th move.

Together, AI-focused occupiers have taken up nearly 250,000 sq ft of offices across King’s Cross and Euston so far this year, according to property consultancy Cushman & Wakefield.

The surge in activity has pushed up values.

Large offices now cost £2,315 per sq ft, up 7pc on last year’s average.

Rents, which were half of the central London average in 2010, have shot up, making the area one of the capital’s priciest zones.

The King’s Cross Group runs the estate on behalf of its owners, Melbourne-based pension fund AustralianSuper and US investment giant Federated Hermes. Leo Shapland, the group’s chief executive, describes the area as being “at the forefront” of AI innovation and technology.

“It is clearly a hub for AI, not just in London but in the UK and Europe,” he says. The UK ranks third in the world for talent in developing AI, after the US and India, according to CBRE.

Few could have envisaged this would be the case.

“If anybody told you that 20 years ago, they were building King’s Cross with the intention of becoming the home of AI, nobody would have known what they were talking about,” Shapland says.

Unlike previous government attempts to force through the creation of tech clusters, King’s Cross has happened without the need for a centralised scheme. As one report on the Knowledge Quarter noted, “such clusters can’t be developed artificially”.

In theory, the concentration of AI start-ups in one zone and major investments from international companies will make King’s Cross an economic powerhouse, as well as a home for invention.

The area is also home to the Francis Crick Institute, a biolab; the Alan Turing Institute, Britain’s national AI body; and Aria, the Government’s £800m research lab.

It is certainly leading to some lavishly compensated individuals, raising hopes that it could help London shake off its reputation as a source of cheap tech talent. One Anthropic job posting last week raised eyebrows after offering a salary of up to £630,000.

That is good news for tax receipts, especially if OpenAI and Anthropic successfully carry out New York IPOs this year.

King’s Cross is also home to XTX Markets, the tech-heavy trading business whose chief executive, Alex Gerko, is Britain’s biggest taxpayer.

There are questions about the wider impact of this influx of AI firms into the area, however. Klein points out that Somers Town, the small district between Euston and King’s Cross, is one of Britain’s poorest neighbourhoods.

AI’s clustering in King’s Cross has also made it a target for protesters.

Last year, two activists calling for companies to suspend AI development staged hunger strikes outside DeepMind’s offices, one lasting for 16 days. In February, hundreds attended a “march against the machines” in the area.

At the same time, insiders warn that the soaring salaries, offered by the world’s richest companies, are making it harder for local start-ups to secure talent. Others say the benefits of the AI boom risk coming at the expense of other areas.

Mike Prew, a respected property analyst, warned in February that if AI were to prompt a wave of white-collar redundancies in a “dotcom crash déjà vu”, tens of thousands of jobs could be lost.

If 50,000 jobs in London are shed – about the amount lost after the dotcom bubble burst – then the equivalent of 12 Gherkins would be emptied.

Yet, this assumes the AI boom continues. It is not necessarily a given.

The premium offices and lavish salaries being offered by AI companies are the result of record fundraising levels and a historic stock market surge driven by unbridled optimism about the technology.

This has, however, been marked by persistent fears that the boom has become a bubble that could be easily pricked – either if AI adoption is slower than expected or if the industry turns out to be so commoditised that nobody can make a profit from it.

While the AI boom is visibly benefiting King’s Cross, Shapland stops short of declaring it a future-proof sector.

He says AI occupiers are in “a growth phase [that] is substantially accelerated over the traditional, more established industries”, bringing not just jobs but “a momentum and a prospect for growth that is differentiated”.

Still, he says making AI the sole focus for national growth “would probably be myopic”.

For King’s Cross, it suggests that perhaps its high concentration of AI companies may be a cause for concern.

Madelin says that developers were initially wary of letting so much space to one company or industry, as ultimately happened with Google.

“We didn’t want one business dominating the location because if anything changes, if that business disappears or splits or decides to do something else, you end up with all your eggs in one basket,” he says.

The global financial crisis and the company’s offer to sign a 999-year lease helped to change minds.

In Shapland’s view, though, if the boom tails off, something else will be around the corner.

“Over the last generation, the life-cycle from start-up to large company has become much shorter,” he says. “Our job is just to create the environment and then if the next wave of innovation is around music or fashion or textiles or energy or whatever it may be, our job is to be a place that welcomes that.”

On the flip side, if the boom continues, London is likely to be better placed to benefit than anywhere else.

Even tech-heavy hubs do not have the advantage of King’s Cross’s proximity to biolabs and creative industries, says Klein.

“Show me where this is in New York. It’s nowhere. It’s nowhere in Seattle. It’s nowhere in Austin,” he says. “This is a Square Mile built for the future. The last 60 years of innovation, the Silicon Valley era, is the past.”