Office Space in London
For many companies, the way their staff use the office has completely changed in the last 2 years. The rise of hybrid working has transformed the role of the office into a collaboration hub, but many offices are not designed for it. As a result, your office becomes a very frustrating place for your people. Productivity is down, collaboration is down, and your best staff are considering leaving.
If you’re realising that your current office just doesn’t meet the needs of your company anymore, you’re not alone. Almost half of mid-to-large size UK companies plan to move offices within the next three years.
At Zentura, we have carried out hundreds of office relocations, including office moves for companies such as Casio and Gett Taxi. We understand that this is a daunting process for many companies, who often struggle to know where to start. Clearly defining what is wrong with your current space, and what you want your office to achieve is a great first step. Most people try to start with the second part, which is the cost. Defining your objectives first will prevent cost from overriding all other considerations.
The cost of your project depends on a variety of factors, from lease terms to the amenities of your new building. To help you find the right space for you, we’ve compiled a detailed look into what office space in London costs, as well as the key questions of what affects office lease costs and how much space you will need.
What Affects The Cost Of Office Space?
Unsurprisingly, the biggest single factor that will impact the cost of your office lease is the location. Many companies prefer to have offices in a location popular with their industry – e.g., boutique banks in Mayfair or tech companies in The City. When choosing the location of your new office, consider the reputation of that area, and what it says about your company.
Prestigious locations such as Mayfair and St James will cost around £135 per square foot per year. Inner-city locations such as Aldgate or Barbican cost nearer to £100 per square foot per year.
The quality of the actual space will also be an important factor in your lease cost. This includes the utilities, natural light/ views, and general quality of the building itself. The costs mentioned in this article are based on good quality space with standard amenities. For landmark buildings or tower blocks, the rates will be much higher. Lower cost (and quality) spaces will also be available.
The impact that amenities have on your lease cost will vary depending on your location, and so will the options available. Some amenities such as receptions, lifts and toilets are available in almost every building, but the quality does vary. Additional Amenities such as coworking lounges, outdoor areas, cafés, or lounges are valued highly by staff, but they do push the costs of your lease up.
Transport links are often overlooked when comparing options for offices, but the ease of access is incredibly important to staff. The location of your office needs to be as convenient as possible for all your staff, clients, and visitors. One of the main reasons many staff like working from home is the lack of commute. Making the commute as painless as possible will encourage your staff to be in the office more often.
The length of your lease term will also impact the cost you pay per square foot per year. Short-term leases (1-3 years) provide a lot more flexibility and are less risky than leases of 5 or more years because you are making a smaller commitment. This is reflected in the cost you pay per square ft per year. Mid and Longer-term leases, on the other hand, provide greater stability and are more commonly available.
How Much Space Do I Need?
Leasing the right size space is just as important as the cost you pay per square foot per year. Over the last 3 years, the amount of space companies need has changed, as well as what they need within that. A simple calculation based on your employees and space per employee is a good place to start.
The recommended amount of space per employee for professional services firms is 150-180 sq./ft, though this is only a guide. Some industries have an average of 110sq/ft per employee, others over 400. Workplace requirements are completely unique to your business – what worked for a friend or competitor may not work for you.
Open-plan hybrid office design is much more space efficient than traditional designs. Personal desks are much less common, as it is a waste of space if staff are only in the office 2 or 3 days per week. Spaces such as private offices and boardrooms are very space-consuming and will drive your total space requirements up. For open areas, you will want to allow 40-80sq/ft per desk, while private offices tend to be 100-250sq/ft.
The different types of spaces within your office are also an important consideration. In 2019, the average office had 10% collaboration space. In 2022, the average office fit-out contains 35-40% collaboration space. The amount of collaboration and breakout space will vary massively depending on the style of your design and the time they are meant to spend using those spaces. Most companies allow 50-70sq/ft per employee. You will also need to factor in formal meeting spaces, teapoints, toilets, receptions, and other common areas.
Another factor to consider is your growth plans – how many staff do you plan to have by the end of the lease? Though you don’t necessarily have to add extra desks right now, making sure you have planned for it will prevent overcrowding or outgrowing your space before the end of your lease term.
Office Lease Costs in London
Now that you understand what affects the cost of your lease and how much space you’re going to need, let’s look at what lease rates currently are in London. The costs mentioned in this article are based on good quality space with standard amenities. For landmark buildings or tower blocks, the rates will be much higher. Lower cost (and quality) spaces will also be available.
The advertised rent cost is different to the cost you actually pay. In addition to the space rental costs, you will also have to pay service charges to the landlord. This covers utilities and common services, from electricity to receptionists. Another additional cost is business rates – a tax based on the rental value of your office.
An experienced and well-connected commercial estate agent is essential to finding the right space, at the best possible price. Using their network, they are often able to find office space before it comes on to the open market. This makes the space cheaper, while their negotiating skills will further reduce the cost you pay. Some estate agents will charge a percentage of the fee they save against market rates, while others will charge a percentage of the overall rate. For many agents, this will equate to 3-5% of the first year’s rent, though this can vary massively.
These costs are quoted rates based on rent reports and commercial real estate studies. Costs are subject to change and will vary from building to building.
Your workspace requirements are unique, and no two office relocations are the same. The main factors that will determine your office rental costs are location and condition. High-quality buildings in prestigious locations will be attractive to your prospective staff and clients but come at a cost. Deciding how much space you need is equally important, as this will also have a huge impact on your real estate costs.
While leasing is the biggest cost of your office relocation, you will also need to factor in legal costs, dilapidations, fit-out costs, operating expenses, and the actual relocation itself. To learn more about what that will cost, check out our article on the cost of London office relocation in 2022. You’ll get a full breakdown of everything you need to know about office relocation project costs.
For further advice on how to relocate your London office, contact our workplace experts. We can help you to shortlist and audit a number of suitable properties for your office, working with our network of commercial property agents. Our workspace consultancy package helps you uncover the data that will guide your decisions and planning for the future.
We then develop a full office design for your new office that will bring your company culture and workspace strategy to life. Working with our approved supplier and sub-contractor network, we manage the entire fit out process from start to finish. With our unique project management approach and our fixed fee guarantee, you can continue to run your business knowing your project is in safe hands. Reach out today.