Businesses are being priced out of the city due to London rents23rd November 2016
According to the 2016 National Office Market Report by property consultancy, Lambert Smith Hampton, the significant and growing difference in premises, staff and housing costs between Central London and the UK’s other key cities is huge.
It’s a worrying reality for many businesses who rely on being near London-based clients and employing and maintaining the right talent. It’s becoming a recognised fact, that many small firms and employees are being increasingly priced out of the capital due to the rise in London rents.
London Vs Regional Offices
The difference in overhead costs in London to other cities, such as Bristol, Manchester and Birmingham is now staggering. Typically, costs outside of London for staff and premises (including rent, business rates, day-to-day running costs) on a new-build office amounts to just over £50,000 per workstation.
A workstation in London’s Midtown area carries an annual cost of well over £80,000.
Tony Fisher, national head of office agency at Lambert Smith Hampton, said: “The significant cost advantages offered by the UK’s core regional cities are such that we are starting to see a rebalancing of business activity away from London over the coming decade. As the differential in occupational, staff and housing costs continue to widen, both bosses and staff are beginning to recognise that there is life outside of the M25.
Alongside publicly funded infrastructure investment, investors and developers will play an important role in turning the opportunity into a reality. New schemes in the core regional cities should be considered to suit the needs of both existing businesses as well as be targeted at progressive occupiers in the capital who may benefit from relocation.”
The National Office Market report also finds that 2015 was an outstanding year for the UK office sector with most markets seeing above trend rates of activity and rental growth.
With one-quarter of 2016 statistics now in, the picture is a little more mixed. Central London seems to have moved into a more downbeat pattern, with take-up significantly down, both year-on-year and against the trend. But this stands in stark contrast to the UK’s other key markets, with impressive levels of activity seen in the Big six markets and the Thames Valley region.
The high cost of London, advises Fisher is: “A challenge not only for occupiers but increasingly their staff as well. With the case for relocation looking increasingly compelling, could the UK’s main regional centres be on the cusp of a wave of inward investment?”
So, what’s the answer for businesses being priced out of London?
Downsizing your office space within the capital
If your core client base is central London or your business is reliant on being centrally based, then downsizing office space and offering your staff the opportunity to work more flexibly could be the answer.
Do all your staff need to be in every day all at the same time? While communication is crucial in most industries, business has been gifted the opportunity to communicate sufficiently through modern forms of technology.
Offering staff remote working opportunities (if applicable to the industry) could mean that the need for large office space is largely reduced. You may want to consider a hot desking set up when staff are in the building and additional breakout areas instead of building extra meeting rooms.
The opportunity to work more flexibly also offers staff an incentive to stay on with the organisation by offering a better work/life balance.
Alternatively, downsizing to a serviced offices with other occupiers could be of interest.
* If your commercial lease is due to expire in the next 12 months and you would like further advice on how you can reduce overheads and future proof your workspace environment, then do get in touch with us on 01252 712590 or firstname.lastname@example.org.
Relocating to regional offices in London outside of the city
There are many up and coming areas of London that your business could consider relocating to in the future.
South West London is becoming very popular and is well serviced by tubes and overground rail services. East Croydon, for example, has just launched Box Park. The first Box Park, a hub of eateries and fashion pop-ups launched in Shoreditch in East London in 2011 and the surrounding area has seen an influx of creative agencies and start-ups over the years.
With many of these companies now being priced out of East London and the gentrification of areas like Croydon, businesses can now relocate at much lower rates.
Crossrail 1 and 2 will also have an impact on how we travel in the future and where businesses choose to base themselves.
Our top tip? Keep a look out for more obscure areas of London being developed and invested in.
Relocating to regional offices across the UK
Although the annual salary in London is 33% higher than in other regions, the cost of living outside the capital is a lot cheaper. It is estimated that in areas outside of London the price of living costs 40-60% less. Rent in London is one of the highest in the world, never mind just the UK. A one bedroom flat in London can cost the same in rent as a three-bedroom house in the north of England. The commute into and out of London can also be very costly and stressful.
Relocating to a regional office will reduce overheads, and although some staff may be lost in the decision to move, you’ll attract local talent who will be able to offer valuable expertise.
Again, technology can aid communication with clients’, and you may want to reconsider the number of meetings held in central London through these forms of communication to reduce overheads.
Many large finance companies such as PwC and HSBC have offices across the UK in other cities like Birmingham, Glasgow and Manchester. Working in a regional office can also help support regional towns by improving the surrounding economy.
How can Rapport help?
Rapport’ work alongside commercial office agents in the market, and are on hand to offer impartial and independent advice if your business is looking to relocate. Making an assessment of your current workspace, we can identify opportunities to reduce overall space requirements and improve communications and interaction across the business.
We have significant experience in the commercial industry and are happy to provide support via an informal discussion. If you would like additional advice on anything featured in the above article do get in touch.
Phone: 01252 712590