Working out the cost of renting office space in 2022 In the early days of the pandemic, it seemed
By Rachel O'Hara
In the early days of the pandemic, it seemed like it could have been the end of office life as we knew it. But offices bounced back, and not because they were the only places people could complete their work – they no longer were – but because people wanted to reunite and collaborate in person with their colleagues in a place designated to work.
Having an office of your own has many benefits, especially in London, where you can stay connected to your clients and access a highly skilled workforce. In a cultural melting pot like London, it’s no wonder there are so many private and shared office spaces available for rent, with their prestigious postcodes having the power to put your business on the map.
If you are trying to calculate the cost of office space in London, keep in mind that there are more costs to consider than just the price of rent. Read on to learn more about all the hidden costs you should factor into your budget, to avoid expensive miscalculations.
Let’s start at the beginning, rental costs are usually calculated per square foot, so the cost of an office space will increase as the size increases. Because of this, it’s important to consider how much space you really need before starting your search, and how much you are likely to need in the future as you expand your business. It is suggested that 95 square feet are given per person in a standard workspace, so use this as a basis for your calculations.
Below is a table showing the average cost of office space in London, at each of our tiered office fit out specs to give you a rough estimate of the current market. As you can see from the data, rent costs per square foot tend to increase as the office space increases in size and quality.
|Location||A Good Runner||The Executive Saloon||The Supercar|
|Tech City||£20 – 40||£27.50 – £62.50||£40 – £80|
|Square Mile||£25 – £40||£37.50 – £60||£55 – £75|
|East London||£20 – £25||£25 – £35||£35 – £57.50|
|Midtown||£30 – £45||£40 – £60||£50 – £75|
|North London||£20 – £50||£35 – £65||£42.50 – £80|
|South London||£19.50 – £40||£30 – £60||£40 – £82|
|West End||£27.50 – £55||£40 – £85||£62 – £150|
|West London||£25 – £50||£30 – £70||£40 – £87.50|
Alongside rent payments, you are required to pay service charges to your landlord during your lease. Service charges cover the cost of repair and maintenance costs, such as the cost of maintaining air-conditioning systems, water, internet, energy, cleaning, and the security provided by the landlord.
There is no fixed legal definition of what is included within service charges so these are dependent on your specific rental agreement. On average, service charges cost 30% of your rent – so it is vital that you factor this in when calculating the cost of office space in London.
When renting an office space, it is vital to ask the landlord whether they intend to tax the commercial property’s rental income at the earliest stage of negotiations. If so, you may be able to negotiate a reduced rental figure, this is particularly important if you are not VAT registered and so would be unable to reclaim these costs back.
During this negotiation stage you may also ask for a clause included in the tenancy agreement that would prevent the landlord opting to charge VAT during the entirety of your lease – giving you long-term peace of mind and allowing you to budget your office space cost appropriately.
We always recommend you hire a qualified building surveyor, like the ones in our team, to inspect the property before you make that all-important decision and sign on the dotted line. Building surveyors produce a detailed report of the condition of the building, and any potential repair and maintenance costs you may not have factored into the cost of your office space.
You may also want to hire a solicitor to handle the terms of the contract on your behalf. Commercial property law can be complex and it’s crucial to get it right first time or you could be unprotected against some hefty costs further down the line. Both solicitors and surveyors can have heavy fees, though they are both likely to save you money in the long run.
Looking for an office space in London that fits the needs of your business, whilst fitting your budget can often feel overwhelming. That’s why many people use commercial property estate agents, like us, to help take all the stress out of the moving process. Estate agents often have access to a wider range of commercial property, have established buying power within the market, and can help negotiate the best lease for their clients. Their fees for providing these services tend to be a percentage of the annual rent.
An EPC is a certificate that shows how energy efficient a building is. They are required when renting out a property and it is normally the landlord who pays for this (though not in all cases so it’s useful to check this before signing the terms of your contract). A commercial property with a higher rate of energy efficiency is likely to have lower running costs than one that uses energy inefficiently, so this is another important factor to consider when estimating the cost of office space in London.
Building insurance provides financial protection if there is any damage to the structure of the commercial property, such as the walls, roof and floor. Building insurance is normally provided by the landlord, though it is worth checking this within the terms of your lease.
Building insurance does not cover the items within the building, so it may be worth taking out contents insurance to cover these too. This is especially important if you have expensive equipment or stock within your office space that would be costly to repair or replace if anything were to happen.
And last but not least, business rates are fees that must be paid on all commercial properties – as soon as your name is on the lease. The rates are established by the VOA (Valuation Office Agency) and are calculated based on the property’s rental value, usually paid over 10 monthly installments. Another hidden cost that many people forget when budgeting for the cost of office space – though it is worth noting that there are relief schemes eligible to reduce business rates for smaller businesses.
So hopefully that has helped clear up a few of your questions about the cost of office space in London. Essentially, you can find office space that fits within any budget, but there’s more costs that come with them than just their rent. Now that you’re all clued up – happy hunting!