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Sky-High Office Rents in London Compel SMEs to Look For Alternatives

  • By Phil Press Institute 
  • Category: On The Record 
  • Comments (0) 

Sky-high office rents in London are causing small- and medium-sized enterprises to look for alternatives, including shared office spaces.

Start-up companies have been interested in co-working offices as well since the cost of doing business in the capital have been trending upward at the same time. For landlords, this requires a new way of managing tenants, from rent collection to a possible forfeiture of a commercial lease.

Challenging Environment

According to experts, the average rent for a prime office space in London rose to £62.11 per square foot this year. The higher cost of rentals led office absorption to drop by 10 per cent year-to-date, which was not surprising given the high cost of rentals.

The insurance and financial services sector has accounted for a significant share of the prime office rental activity. SMEs and start-ups in this sector, however, should consider other ways to set up an office in the capital, as they would be dealing with more expensive business rates in the next five years.

Cost of Doing Business

By 2023, the cost of business rates for offices in London would rise by £1.4 billion. Landlords can help ease the burden from this projected increase by considering the benefits of shared office spaces. In 2017, co-working areas accounted for more than 10.7 million square feet of London’s commercial space.

That number would continue to increase due to more freelancers in the next two years when one out of two people in the city will be working independently. Since 2009, freelancers in London have increased to almost five million Britons.

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Co-working spaces will likely continue to increase in London due to issues on affordable commercial rents. As more companies are expected to take up alternative office spaces, landlords should know how to manage their tenant base, especially when it involves rent payments.

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