It’s official: London’s offices are the most expensive in the world to rent. Knight Frank’s annual Global Cities report showed that 600 sq ft of office space in the capital would set a business back nearly £55,000 annually, assuming the rent won’t increase. Which it probably will.
Another study has the figure at £52.50 per square foot, compared with £3.38 per sq ft in Brighton, a city little more than an hour away from London.
What’s driving rent up?
One of the major contributing factors to this expense is business rates; according to business rates specialists Gerald Eve, these are estimated to rise by a total of £7.5 billion after a long-delayed revaluation in 2017.
Retail rates in London are being hit particularly hard, with an increase of 120% in Brixton Road, and New Bond Street’s rates going up by 88%; Lord Street in Liverpool has the dubious honour of having the third highest rates increase, at 71%.
Business rates for offices are going up just as harshly, with some of London’s most recognisable skyscrapers bearing the brunt of the impact. The Walkie Talkie, Citypoint and The Shard are amongst the top ten office buildings to be impacted by hikes of up to £5.16 million.
Of course, these landmark buildings operate as landmark examples for the rising business rates—all manner of rented offices across the country are set to have their rents increase in the wake of next year’s business rates revaluation.
So what can businesses do to combat the high overheads in one of the world’s priciest cities?
The serviced office solution
Serviced offices have been increasing in popularity almost in tandem with the increased use of laptops in workplaces. Now serviced offices and business centres are worth £16 billion, and are predicted to increase by a further £110 billion in a decade.
This has meant that serviced office providers are able to expand at a much faster rate; founded in 2009, i2 Office now have over thirty serviced office buildings, with many more individual serviced offices around the UK, including space in some of London’s most expensive postcodes.
These offices provide all the equipment companies need to keep their operation going, and have therefore been particularly beneficial to startups. Contracts are flexible, allowing for up- or downsizing, and employees have 24-hour access to the space.
Most significantly, all bills—including business rates—are included in the rent; this offers companies savings of up to 50% compared with renting standard office space.
Is the future flexible?
Startups who don’t necessarily need a full-time base could make use of bustling co-working or hot desk spaces, or even the free environs of the humble coffice, where workers are able to get their work done at their leisure, provided they nurse a £3 latte while they do it.
The Harvard Business Review has pointed to coworking spaces as allowing staff to take charge of their work in a way they consider more “meaningful” than in a traditional office block.
Although London’s co-working spaces are typically expensive—a pod for one person costs an average of £357 per month—the overheads are still low compared with office rental for a small team.
Shared working spaces also encourage collaboration and cross-pollination of ideas between employees and companies which standard offices do not. The ability to network and intermingle with new people to create opportunities for fledgling businesses is an essential part of startup culture.
However new companies choose to give themselves such opportunities, the potential for growth is most likely to be found outside of the office as we know it.