How much does it cost to rent London office space? The 7 main costs explained

Back in 2009, I wrote a blog post about the 6 costs involved in renting an office in London. To this day, it’s one of the most read pages on this website. But it’s more than 6 years old – the world has moved on and it’s more than a little out of date. So I’ve decided to revise and update it for 2015: and there are now 7, not 6 costs to rent London Office Space.

Office rent is typically quoted in pounds per square foot. But it’s more complicated than that. Our clients want to understand the full breakdown of costs for their office space, before they commit.

Of course rent constitutes the largest cost, but it is vital not to overlook other the other main recurring costs and also the initial outlay when signing a lease.

At Find a London Office, we aim to make costs as lucid as possible in order to simplify the process for our clients.

The 7 main questions on London office costs are:

1. How much are office rents in London?
2. What are the main recurring costs involved in renting a London office?
3. What one off costs are involved to rent London office space?
4. How much does it cost to fit out an office?
5. What are business rates?
6. Is VAT paid on rent?
7. What if I have an existing office?

1. How much are office rents in London?

Rents vary widely depending on location and office type. For more information see our definitive London office rental guide – updated on a quarterly basis to provide rental estimates for high quality office space in 18 London office locations. Less expensive space is usually available.

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2. What are the main recurring costs involved in renting a London office?

The 3 main recurring costs to rent London office space are:

1. Rent
2. Business Rates
3. Service Charges

Estimates of these 3 costs are provided in our office rental guide and our office space calculator includes all 3 costs in its total estimate.

Interestingly, rent only constitutes say 70% of the overall cost so accurate estimates for business rates and service charges are critical.

Above these costs tenants are usually responsible for main utilities. However, some utilities – e.g. electricity for air conditioning – may be covered within the service charge.

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3. What one off costs are incurred to rent London office space?

• IT, telecoms and data expenditure (watch the lead in time)
• Removal costs
• Legal costs
• Stamp duty
• Office finder fees
• Building surveyor fees
• Other services engaged
• Terminal lease costs – dilapidations or costs of disposal
• Fit out costs (see next question)

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4. How much does it cost to fit out an office?

If office space is taken from a tenant (a sub-let), you may benefit from their fit out – partitioned offices, reception, boardroom, kitchen, break out, comms room etc .

If the office is taken direct from a landlord , it will tend to be delivered as open plan space: the cost of the fit out will be borne by the incoming tenant.

Fit out costs will depend on the level of work required and in our experience the cost can typically equate to between £20.00 – £40.00 per ft².

We will always seek to mitigate this cost by negotiating an initial rent free period.

At the end of your lease, there is usually an obligation to return the space to its original state by removing the tenant’s fit out, making good and redecorating.

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5. What Are Business Rates?

Business rates are a property tax charged to the occupier by the local authority. This tax varies widely from say £10.00 per ft² in Shoreditch to well over £40.00 per ft² for some properties in Mayfair. See our rental guide for the business rate costs across London.

The cost of rates is linked to the rental value of every office at a point in time when commercial properties were last revalued for rating purposes. The next business rates revaluation will come into effect in 2017, with reference to rental values in April 2015. We expect business rates to rise in the London sub markets we cover, but increases tend to be phased. Some areas will suffer disproportionately where rental values have increased most dramatically since the last rating revaluation (e.g Clerkenwell and Shoreditch).

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6. Is VAT Paid on Rent?

Generally yes. Most buildings are now VAT registered, so VAT is payable on rent and service charge – but not on business rates.

Some VAT-free buildings can be sourced for groups who cannot reclaim VAT (e.g. banks and charities), but the supply has reduced significantly.

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7. What if I Have an Existing Office?

The trick is to minimise any duplication of costs. In our experience it is best to start the process as early as possible to audit terminal lease exit costs such as dilapidations.

We recommend speaking to us early to discuss search parameters to help define availability, costs and timing.

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Looking to rent London office space?

If you’ve read this far, chances are you are looking – or about to start looking – for offices in London. We can help – please click here to let us know what you want and we will start the ball rolling.