Demand for London office space poses problems for small businesses

As demand for London office space grows, desk rental costs are increasing rapidly meaning smaller firms need to keep a watchful eye on their finances.


Such high costs could spell trouble should a business itself in difficulty, with the latest research from Office Genie suggesting UK start-ups are paying the price of locating in the capital.


The office space search engine revealed a 36% increase in the number of firms searching for space in 2014 compared to a year previously.


But this increase in demand has not gone unnoticed by property owners as the cost of desk space in London is more than double the UK average.


Currently, a business is paying an average of £512 per desk per month for serviced office space – well above the UK average of £224.


While many firms who locate in the capital can afford to do so, they must keep a watchful eye on the economy should their circumstances change at any point.


There is also a danger that firms will fail to find suitable, or affordable, office space in London which could potentially damage their business prospects.


Many firms are reacting to the changing situation though, with regeneration areas such as Victoria and Kings Cross seeing a notable increase in demand.


Searches for serviced office space in these regions were up 106% and 60% respectively as the start-ups turn their backs on previously popular locations such as Soho.


A lack of supply of office space in Old Street and Shoreditch saw searches fall in these regions too, despite the region being a hotbed for the London tech start-up scene.


Locations such as Clerkenwell and Liverpool Street have instead proved popular as demand for serviced office space in the latter doubled in 2014 compared to a year before.


Vast differences in the cost of office space exist in London, with a 180% difference between the highest and lowest priced areas for monthly desk space costs.


Moving small distances across the capital can beneficial for businesses, with costs in Holborn – some ten minutes from Soho – around 10% cheaper for example.


While the start-up scene in London is booming, the high levels of finance required mean businesses need to place great emphasis on the effective management of their cash flows when basing themselves in the capital.


Sharing an office could be an option to cut costs, while those facing severe financial issues should contact insolvency practitioners in London for guidance on the best course of action.


By Phil Smith


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