SME’s finances squeezed by London desk rentals costing over £7000 per year

The thriving and vibrant London start-up scene has contributed to a massive demand for serviced office space, with searches for desk space in the capital up more than a third (36%) last year compared to 2013, according to research by office space search engine, Office Genie

Desk_216094354

But Office Genie figures reveal that London start-ups and SME owners are paying the price to be based in the capital, with the average cost of desk space more than double (129%) the UK average. Businesses are currently paying an average monthly cost of £512 per desk for serviced office space in London, compared to the UK average of £224.

With the London economy booming, there is a danger that businesses will struggle to find suitable office space in the capital. And many businesses are looking outside traditional areas to find better value office space.

For example, Soho has always been a popular location for start-ups and SMEs, but searches were only up 14% last year compared to 2013, with many serviced offices at near 100% capacity. Businesses have looked instead at areas such as Victoria and Kings Cross, which have seen a significant amount of regeneration. As a result, searches for serviced office space in Victoria were up 106% and in the Kings Cross area up 60%.

Similarly, the EC postcode has been the birthing place of the London tech start-up scene. Tech City, also known as Silicon Roundabout, began as a government initiative to encourage tech SMEs and is now home to thousands. But searches for serviced office space in Old Street and Shoreditch were only up 19% and 22% respectively last year, which can be put down to a lack of supply.

Instead, businesses have looked at other locations such as Clerkenwell, where searches were up 47% last year, and Liverpool Street, which as a City location appeals to the growing number of Fintech start-ups. Demand for serviced office space in Liverpool Street doubled in 2014 vs 2013.

When it comes to serviced office prices, there is a huge difference in the cost of desk space across London, with a mammoth 180% difference between the most and least expensive areas for average monthly desk space costs.

Knightsbridge and Notting Hill are currently the most expensive areas (£654 per month) to base a business in the capital, while Brixton, at £233 per month per desk space, is the cheapest. Soho, popular with media businesses, remains an expensive area, with the average cost of desk space around £586. However, Holborn, which is only a ten minute walk away from the outskirts of Soho, is almost 10% cheaper on average.

The following table shows the monthly cost of renting a serviced office, calculated per desk space, in areas of London.

Area of London Average monthly rental costs of a desk space in a serviced office
Knightsbridge £654
Notting Hill £654
Chelsea £652
Kensington £648
Mayfair £638
Victoria £624
Bayswater £596
Bond Street £596
Liverpool Street £590
Paddington £590
Westminster £590
Soho £586
Bank £571
Aldgate £570
Canary Wharf £570
Covent Garden £562
Marylebone £554
Holborn £536
City £535
Canada Water £525
Waterloo £525
Shoreditch £521
Southwark £513
Hammersmith £501
Fulham £481
Clerkenwell £479
Farringdon £466
Battersea £450
Kings Cross £445
Camden £442
Old Street £415
Angel £402
Clapham £394
Putney £376
Islington £371
Wandsworth £312
Chiswick £298
Brixton £233
AVERAGE £512

Looking at postcode district, north London offers the best value when it comes to serviced office space and desk rental, with average monthly desk costs of £406, just over 19% cheaper than the average. This compares to West London, where serviced office costs are on average £589 per month per desk – that’s 45% more expensive than north London.

The following table shows the monthly cost of renting a serviced office, calculated per desk space, in postcode districts of London:

Postcode districts Monthly rental costs of a serviced office per desk space
W £589
E £570
WC £526
SE £520
EC £511
SW £466
NW £442
N £406
AVERAGE £504

Peter Ames, head of strategy, Office Genie comments, “The London start-ups and SME scene is booming and it seems every week a new tech or Fintech company launches in the capital. For many business owners, London really does seem to be the only place to be, but that is putting a huge strain on the serviced office space market, with many areas seeing demand significantly outstripping supply.”

“The worry is that the capital is struggling to cope with the demand for space, and inflated prices could leave many SME owners with little option than to base themselves outside central London. With cities like Manchester, Bristol and Birmingham thriving as alternative business hubs, and being able to offer much cheaper office space, it’s important that the London start-ups and small business community is catered for, or we could start to see a mass exodus of talent from the capital.”

“For start-ups looking for cheaper desk space, sharing an office could be a cost effective and flexible option. In London, the average shared office desk costs around £432, which is 16% cheaper than renting a serviced office space. So sharing could be the most compelling answer for what is a race for space in a competitive market.”