In our latest London office rental guide (recently updated for Q3 2015), we have detected no increase in rents from Q2 for the first time in a few years – when quarterly London office rent rises have become the norm. Has the market peaked? Is demand now static or is supply catching up with the recent growth in demand?
In fact, we suspect none of these is true and that this is nothing more than a pause for breath (rather than the beginning of a new long-term trend). There continues to be an imbalance between supply and demand in the key office markets we monitor – which we foresee will continue to be the case for some time to come.
Calculating the overall cost of renting office space
Most visitors to our site are potential tenants interested in the overall cost of renting an office, so we analyse business rates and service charges as well as headline office rents. Overall occupational costs – and notably business rates – payable in prime Mayfair and St James’s are now so high that many businesses are no longer able to consider occupying space there. Business rates alone – at over £40.00 per ft2 – exceed rent per ft2 in every other UK office market outside the M25!
Choosing more cost effective premises in less central areas
More cost effective areas such as the Southbank, Clerkenwell, Shoreditch, Tottenham Court Road, Holborn, Euston & King’s Cross and are becoming the “go to” locations for a huge variety of office tenants. Despite the cost pressures, tenants remain very committed to finding office space close to excellent travel communications – and this is very much possible, even in comparatively peripheral locations.
But not too peripheral…
A case in point: we have recently found a new office for Alpharooms. Initially, their search was focused on King’s Cross specifically because of the rail connection to their headquarters in Sheffield. But with nothing appropriate to see in the heart of King’s Cross, we switched our focus to available office space by the Grand Union Canal – about 10 to 15 minutes walk from the station. These offices were very attractive, but Alpharooms felt uneasy about staff navigating the hinterland of King’s Cross to get to the office or just to find a Starbucks! So we switched focus once again to Euston, ultimately finding the perfect office at 30 Euston Square NW1, adjacent to the station and they moved in last month.