DTZ Occupier Perspective Stockholm 2013 Office space and location needs for computer game developers

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1 DTZ Occupier Perspective Stockholm 2013 Office space and location needs for computer game developers 8 November 2013 Contents An expansive business sector 2 The background to Sweden's successes 2 Perspectives on office locations in Stockholm 3 Thoughts about office premises 5 Summary 6 Author Karin Witalis Head of Research + 46 (0) karin.witalis@dtz.com Contacts Magali Marton Head of CEMEA Research + 33 (0) magali.marton@dtz.com Hans Vrensen Global Head of Research + 44 (0) hans.vrensen@dtz.com Computer game development is a rapidly changing industry that has experienced explosive growth. Currently, Swedish game developers are among the top in the world and are leading this industry growth. Several of these top computer gaming companies are based in the capital city, Stockholm. In addition, some of the most successful computer games have been developed here. Stockholm is now recognized as one of the world s strongest locations for game development and over the last few years has seen considerable industry expansion. Computer game developers have growing needs for efficient and attractive offices. Understanding this sector's unique requirements and desires enables the real estate industry to provide them with the right type of offices in the right locations and contribute to strengthening the computer game industry in both Stockholm and Sweden. These needs include technology, security, architectural design and layout, physical location in the city and support services. The findings in this report are based on interviews with approximately twenty computer game developers based in Stockholm. The interviews were conducted in the spring of Our intention with this report is to contribute to broadening the knowledge among real estate actors regarding computer game developers needs for office locations and premises in Stockholm. Figure 1 Computer game developers turnover, Sweden. SEK bn Source: Swedish Games Industry, Game Developer Index DTZ Research

2 An expansive business sector Strong growth in recent years Computer game development is a rapidly changing industry in a market that is basically exploding. Many Swedish game developers are among the world leaders was a record year for the Swedish computer game industry and exports of Swedish computer games, with developers nearly doubling their turnover to SEK 2.3 billion 1. This trend continued in 2012 with a 60% growth in turnover to SEK 3.7 billion. The impressive progress in is partly due to the fact that individual companies had huge successes. One example is Mojang, the developer of Minecraft, who had a turnover of SEK 1.5 billion in New distribution channels Another explanation to the phenomenal growth rate is the emergence of new methods of delivering computer games. Examples include mobile telephones, social media and the internet. These new distribution channels have given the industry access to new user groups that were previously not familiar with computer games. Furthermore, game development companies have been able to bring in extra staff and people with specific skills from other companies. Business productivity has been stimulated by this flexibility, which is fairly unique for the computer game industry. However, if the sector continues to grow at this speed there will be risks for bottlenecks such as shortages of personnel with the right qualifications. The background to Sweden's successes A long tradition of games development The story of Sweden's success in game development started more than just a couple of years ago. Let s go back in time and have a look. Sweden has a long tradition of computer game development 2. As early as the 1960s the first Swedish computer game was made using the computer SAAB D2. With the help of wheels on a plastic box, one adjusted the angle and power of a cannon that was fired towards a green dot. Today this game seems rather primitive, however it was in fact one of the first three computer games to be developed in the world. It took another 15 years before computer games became popular in Sweden. The first games were made in the USA and Asia and they were quite simple machines that were connected directly to the TV. From home PCs to smart phones In the 1980s, when the home PC made its entrance, the interest for computer games grew rapidly and people not only played but also started to develop their own computer games. Greve Graphic based in Lund, Southern Sweden was the first Swedish game developing company and was founded in the middle of the 1980s. Their computer games paved the way for other game developers. In the beginning of the 1990s a newcomer named Digital Illusions entered the market with the computer game Pinball Dreams. The game was a best seller for many years and came to be the start of what is now referred to as the Swedish computer game wonder. Today Digital Illusions is called EA Digital Illusions CE, or DICE, and is one of Sweden s leading computer game developers with approximately 350 employees in Stockholm. Computer game development is a dynamic industry where technology, business models, game design and marketing methods are constantly changing. A few years ago online games such as World of Warcraft dominated the market. Then came party games such as, Singstar and Guitar Hero, followed by advanced gaming consoles by Nintendo Wii and Sony s Playstation 3. Shortly thereafter Facebook games 1 Dataspelsbranschen 2 The historical expose is based on information at DTZ Occupier Perspective 2

3 such as Farmville became popular with more than 100 million users. Today game development is very much focused on applications for the iphone and Android, however online games like Minecraft have more than 20 million players 3. More than computer programming Sweden already has a strong position in Information and Communications Technology (ICT) as a result of generally widespread computer experience, a comprehensive development of broadband and a prominent position in computer programming. This partly explains Sweden's success in game development. Moreover, developing computer games also requires skills such as, game design, screenwriting, storytelling, graphics, animation, sound, music, and programming. Sweden is far ahead in all of these areas benefiting from a highly developed design culture and recognized success in music and fashion. Another advantage is that the Swedes are constantly being exposed to the English language through non-dubbed movies on TV and cinema. Education programs have mushroomed Education programs specific for computer game development are available in Sweden in Falun, Malmö, Stockholm and Skövde. In addition, shorter training courses in specific areas such as programming, graphics and design for computer games are available in many regions across the country. In many of these towns, clusters of start-up game developers are emerging. However, most of the established computer game developers are based in the three major cities, as well as in Uppsala, Umeå and Skövde. A great many of those who work in the industry are also self-taught. Widespread entertainment form Sweden has a large percentage of game players. According to a survey from 2010, 81% of all Swedes are playing computer games (Reflect). According to the survey Kids & Media, 77% of people in the age group 9-16 years played computer games in 2010 (National Media Council). The market for computer games continues to grow as games are being developed for new distribution channels, reaching larger audiences. Computer gaming is today one of the most popular entertainment forms in Sweden. 3 In December 2012, Minecraft sold over 8.3 million copies on PC and over 17.5 million copies on all platforms (Wikipedia). Perspectives on office locations in Stockholm A rapidly growing office taker In 2012, the number of employees in the sector increased by more than 50 percent in Stockholm, and at present the sector employs persons in the capital. In addition there are several temporarily employed people. If we assume that this group add another 10 percent to the total staff and that the average office space per person is 15 sq m, the total office space occupied by game developers in Stockholm is almost 19,000 sq m. Figure 2 Office space occupied by game developers in Stockholm Source: Swedish Games Industry, DTZ Research Södermalm is the place to be Computer game developers in Stockholm clearly want their offices to be located downtown. Today game developers are spread throughout the inner city with some companies even in the CBD, despite the higher office rents. However, Södermalm, the Southern part of the Inner City, is about to position itself as a cluster for game developers. The area between the Skrapan building in Medborgarplatsen and Slussen is the place of work for approximately 1,000 people within the computer game industry. Dominant players are all based in this area such as, Avalanche, DICE, Paradox, Eazy and Mojang and they attract many small players. The computer games school Futuremark Games is also located in Södermalm on Åsögatan. Many computer game companies feel that they "have to" be in Södermalm. The creative spirit and the bohemian lifestyle that characterizes this city district attract them. Computer game companies do not consider themselves as being traditional IT consultants that are often based in Kista, north of Stockholm. Instead the game developers regard themselves as being part of the media, fashion and film DTZ Occupier Perspective 3

4 industry sectors that traditionally have a strong foothold in Södermalm. Near public transportation, ideally the underground Most of the people who work within the game development industry live in Södermalm or in the southern suburbs of Stockholm along the red or green underground lines. When being asked to pick an acceptable office location outside the inner city, most companies opt for the southern suburbs instead of the northern. The Globen area just south of Södermalm is a suburban area that is considered to be attractive. Figure 3 Computer games developers cluster and the CBD Anonymous from the outside but not inside In contrast, the micro location and the exterior appearance of office buildings are not considered to be particularly important. Similarly, the building's history is of minor importance. Instead, it can be an advantage for an office to be quite anonymous from the outside. Many game developers want the office location to be a bit hidden and secret, while at the same time everyone in the industry should know where the office is 4. Game developers rarely put big logotypes on the facades. However, the opposite goes for the interior. The interior of the office should ideally be unique and special in some way, and it is important that the office has attitude. The companies want their corporate identity to be reflected in the interior. Moreover, the premises must be neat and representative. The computer games industry is a rapidly changing industry and the companies are anything but stable they are either growing or shrinking. Therefore, office space needs change frequently. The companies see it as an advantage to have a landlord that owns a fairly large office stock in the same city district so that they can move offices without having to change landlord. Want to be located close to their peers Source: DTZ Research The employees travel to work by public transport, or they go by bike or walk, depending on the distance. Almost no one travels by car. Thus it is important for the office to be located near public transportation and a garage is seldom needed. Arlanda airport can be reached by commuter train from Södermalm and therefore proximity to the Arlanda Express train is not a strong argument for being based in the CBD. A city location attracts staff The location of the office is considered to be important from a recruitment perspective. Companies based in the inner city often have a queue of self-taught computer game developers who would be happy to work for free for a couple of months in the hope of getting a full-time job. The general view among the game developers is that this would not be the case if the office were situated far out in the suburbs. Computer game developers prefer, as opposed to many other industries, to be located close to their peers. This is because the computer game companies do not see themselves as competitors in the traditional way. For example, if a consumer buys one computer game one day, there is nothing to prevent him or her from buying another game the next day. For this reason, the game developers congratulate the companies that are doing well because their success is beneficial to the whole industry. Game developers believe that all actors in the chain, from development studios via publishers to distributors, are dependent on each other. Therefore they need to be close. In addition, the companies rent skills from each other. Many 4 A parallel can be made with Nike's "secret" shop 1948 in east London that neither specifies the street address on the website, neither have any logotype on the facade. Despite this the customers know where the store is located. The inside of the venue is spectacular to say the least and is a mix between a shop and art exhibition. The outside is completely anonymous. DTZ Occupier Perspective 4

5 people are freelancers and all players rely on each other. This way everyone knows everyone. Young and social people in the industry Game developers are not bitter rivals who do not want to see each other, but rather the opposite. They want be located close to each other for social reasons; to meet for lunch, go for a drink after work, go to the gym, etc. In addition, the computer game industry is a young industry where most people are between the ages of 25 to 35 years old, and where there are many parties and events of various types such as game developers pub etc. Desirable support services near the office are restaurants, pubs and a gym (the employees are healthier than one might think). Moreover, it is an advantage if there is a distribution point for mail nearby as well as a computer and electronics store. Most computer games companies are very small and when they need a new router or other device they go out to buy one, alternatively order one over the internet, hence the need for a mail delivery point. Consumable supplies for the office are other items that should be available in a nearby store. Thoughts about office premises Open plan with a number of smaller room The ideal office layout for a computer game developer is an open-plan office combined with a number of smaller rooms for meetings and quiet work. Some companies also need one or several project rooms that can be locked and do not have glass walls. This is because some of the computer game projects can be confidential in the initial phase. Most game developers workstations are cramped with computers and monitors. It is common for each member of staff to have two computers, one to two consoles, and two to three computer screens on his or her desk. With all this equipment the so-called flex office or activity based office is not an option for computer game companies. Placement of the individual desks is often project-based and is altered every few months, depending on how a project is progressing. However, just as in any other business, the type of job determines how many desks and individual rooms are required. Sales representatives rarely need a permanent workplace. Often they can sit anywhere during the time they spend in the office. They may only require a laptop and a place to sit. In contrast, finance and human resources require private rooms that can be locked. Air conditioning and internet key criterion Most game developers spend most of the working day in the office. People sit cramped together and the computer equipment is always turned on. With insufficient cooling and ventilation the office quickly gets warm and with bad air quality. Good functioning and adequate air conditioning is something all interviewed companies mentioned as an important criteria when comparing different office alternatives. Several game developers think the indoor climate in their current office is not satisfactory and that it is not easy to find office premises that meet their need in this aspect. An extremely important criterion for the workplace is the speed and quality of the internet connection. The employees must be online constantly to be able to do their jobs. Ideally the companies want to have both wireless and fixed internet access. The wireless connection is handy while fixed is faster and more reliable. Many companies, not all, need extra space and cooling for large server stations in the office. The game developers need for fire and security alarms and other types of security does not differ from any other type of office users. The working hours are not extreme but the DTZ Occupier Perspective 5

6 employers generally allow a great deal of flexibility in terms of when the work should be done. Therefore, it is essential for the employees to easily be able to enter and leave the office at any time of the day and week. Large kitchen area and room for playing games A room arranged for testing computer games is high on the wish list. A simple version is basically a room with sofas and a computer screen where a group of people can play computer games. However, this area can also be much larger with enough room for a ping pong table, pinball, etc. In terms of office layout, game developers want to have a large kitchen area and tea/coffee room. As many as 75 percent of the employees bring their lunch to work and eat at the office. This is done for several reasons; partly to save time and money and because they are very aware of what they eat. It is also part of the Södermalm lifestyle to bring your own food, demonstrating that you are humble with your money as well as that you care about your health and what you eat. The employees are young and environmentally conscious in an urban way. Many are vegetarians or vegans. The stereotypical image of the computer game developer being a pale night owl who lives on burgers and Jolt cola is just not true. The kitchen region is used for more than just eating lunch. This is a place where you can play role-playing games, arrange Friday after work drinks and other social activities. As previously mentioned, the game development industry is full of youth, parties and many social events. The office is not only a place for work but also a place where you meet your friends. A roof terrace or a nice back garden in connection with the office is often highly appreciated by the companies. Summary The office space and location needs for computer game developers can be summarised in the following bullet points: Located downtown South instead of the north Near public transportation, cars not needed A bit hidden and secret No logotypes on the facades Interior should be unique, have attitude and reflect corporate identity Close to their peers Open plan solution Good functioning air conditioning Speed and quality of the internet A large kitchen area Other types of facilities that the game developers would wish that the property owner might provide in the building is a bicycle room that can be locked, a gym or facilities where you can change clothes and take a shower, and a large conference room that tenants can borrow or rent when they need this type of venue. DTZ Occupier Perspective 6

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8 DTZ Research DTZ Research Contacts Global Head of Research Hans Vrensen Phone: +44 (0) Head of Occupier Research Karine Woodford Phone: +44 (0) Head of CEMEA Research Magali Marton Phone: magali.marton@dtz.com Head of Strategy Research Nigel Almond Phone: +44 (0) nigel.almond@dtz.com Head of Research, Sweden Karin Witalis Phone: +46 (0) karin.witalis@dtz.com DTZ Business Contacts Chief Executive, EMEA John Forrester Phone: +44 (0) john.forrester@dtz.com Managing Director, Sweden Agneta Jacobsson Phone: +46 (0) agneta.jacobsson@dtz.com Associate, Occupier Research, Sweden Caroline Axéll Phone: +46 (0) caroline.axell@dtz.com DISCLAIMER This report should not be relied upon as a basis for entering into transactions without seeking specific, qualified, professional advice. Whilst facts have been rigorously checked, DTZ can take no responsibility for any damage or loss suffered as a result of any inadvertent inaccuracy within this report. Information contained herein should not, in whole or part, be published, reproduced or referred to without prior approval. Any such reproduction should be credited to DTZ. DTZ November DTZ Occupier Perspective 8