Stockholm has enjoyed its years in the sun as a startup hub. The Swedish capital has the second highest number of unicorns – billion dollar unlisted tech companies – and the most startups per capita after Silicon Valley. But high office rents could threaten that.
Prime office space in Stockholm can cost up to 8500-9500 SEK a square meter ($875-1040). Figures from Danske Bank show that rents for Stockholm’s top locations have increased by 67% over the last year.
There is also a shortage of affordable housing in a city where Goldman Sachs says that house prices have gone up by 50% since 2012. Rental property is in acutely short supply.
In 2016, Spotify cofounders Daniel Ek and Martin Lorentzon published an open letter in which they said that they would have no choice other than to go abroad to recruit the thousands of people they would need, if the Swedish government and city authorities failed to tackle a number of obstacles, including the shortage of affordable rented housing accommodation.
So the news this week that the venture capital investors Wellstreet are launching The Factory, the largest tech and innovation hub in the Nordics, just north of Stockholm created so much interest that even Wellstreet’s cofounders were taken by surprise.
“This is one of many solutions to the problem with Stockholm’s inner city focus,” says Mikael Wintzell, CEO and cofounder of Wellstreet and a former Director of Commercial Operations at Klarna. “That, coupled with the constant issue of finding housing for talent, and the expensive rental cost for office space, are the main reasons why we’re making this move.”
The 14,000 square feet building in Sollentuna originally built for ABB in 2002, will accommodate up to 100 startups. Expected to be ready by Spring 2019, the ground floor will include an atrium, a gym, and restaurants. Two of the six floors will be home to innovation labs, while Wellstreet will occupy 1800sq meters on the sixth floor.
“The Factory will be a full ecosystem,” says Sïmon Saneback, cofounder of Wellstreet. “The best example of something similar is the tech campuses in Silicon Valley.”
The local authority is occupying space on the ground floor, where there will also be an atrium, a day nursery, gym and restaurants.
Standing close to the edge of Europe’s largest urban tunneling project, the Stockholm bypass, and the E4 motorway, The Factory is only 15 minutes by train to central Stockholm and Arlanda airport, yet the surprising thing about the building is how quiet it is inside.
For the local authority, which will be occupying some of the space on the ground floor, it’s a welcome boost for the Södra Häggvik area where there are adventurous plans to regenerate the area by building 4000 new flats, shops, schools, offices and a new hotel.
Today, however, Södra Häggvik is still a pretty bleak place despite a large nature reserve nearby, sandwiched between two busy motorways on an island occupied mainly by retailers. The nearby shopping mall, where much of the redevelopment is happening, has lost out to bigger and better malls nearby like Mall of Scandinavia and Kista Galleria nearby.
“In the short term, this is a more isolated site, ” Saneback agrees but adds that there will be a shuttle bus to the city center, a carpooling scheme, and a new entrance to the train station.
“We see The Factory becoming a really central place, one of the first of its kind,” says Saneback. “And we believe this could help to strengthen tech companies in outlying areas. We want eventually to try to help build up the ecosystem outside Stockholm – it’s important that there are hubs all over Sweden, not just in the capital.”
The problem of rising property costs in successful startup hubs is happening elsewhere, with a certain inevitability that only larger companies who have helped to establish that hub being able to afford to hang on in there.
The Economist points out, this has happened in Silicon Valley. ‘There have always been big companies in the Valley… ..That has made it harder for young startups to prosper and grow into big companies themselves’.
With half the professional population of Stockholm said to be computer programmers, the flow of startups is unlikely to slow down. The Factory could be a big step in the right direction, and it may help to encourage startups from further afield outside the city.