With already high London office rents still rising at a pace which shows no sign of abating, what are the short and long term answers for prospective business tenants?
Our London office rental guide – freshly updated for Q2 2015 – shows continued rent increases across most central London locations, all well above inflation.
A recent survey by the Royal Institution of Chartered Surveyors (RICS) showed 79% of their respondents expecting to see further increases in already high London office rents.
One of the biggest movers this year has been Midtown – aka Holborn – where well located quality offices cost £65.00 per ft2 or more in annual rent alone. When service charge and business rates are added, the overall occupation cost equates to around £90.00 per ft2.
It doesn’t require many management consultants to work out the cost of occupying offices – even in pretty average parts of central London – is increasingly expensive. In Midtown, 1000ft2 of decent quality space occupied by say 12 people, will cost almost £100k per annum.
How can tenants beat high London office rents?
Here are 5 popular ideas to tackle the problem of high London office rents and to keep costs as low as possible:
- Explore peripheral, lower cost areas. There has already been a large migration of companies from the West End through Midtown to the eastern City fringes. If the trend continues we will end up in Southend!
- Improve space efficiency by occupying single (rather than multiple) floors and creating open plan working environments.
- Go paperless: Use IT to reduce hard storage and reduce the size of desks.
- Work more flexibly: encourage staff to work a day a week from home – releasing 15–20% of space required.
- Hot desking – used in tandem with point 4 above
Long term answer: build more offices in London!
Of course, the long term solution to high rents and low availability is to build more office space! Even though this is outside of our control, take a quick look at the cranes across the London skyline and you’ll see that this is happening; but there is always a time lag between demand and supply – particularly when recovering from an acute downturn. We expect significantly more office stock be completed and available by late 2017.
In the meantime what else can be done?
Misguided planning policy based on short-term thinking?
It cannot have escaped your notice that there is also huge pressure on the London housing market. To alleviate this acute problem, planners have been allowing conversion of central London office space to residential use.
I would urge planners to pause before allowing more conversions. By attempting to solve a problem in the residential sector, they are simply passing the problem to the commercial sector – exacerbating the (already critical) shortage of office space and pushing high London office rents higher still. Short-term thinking.
I have just heard of yet more space being converted to high value residential on the south side of St John’s Square in Clerkenwell, where there is already an acute shortage of office space! This media hub with tax-funded transport infrastructure (including Crossrail) could – and should – be used to accommodate 10 workers per 1000ft2, not one or 2 residents per 1000ft2 in a high value apartment block.
Let Find a London Office help…
If you are looking for London office space – and are struggling to find available, cost-effective space, please tell us what you are looking for and we will do our best to help.