It’s no secret that London could be becoming too expensive for start-ups. Steady rent increases over the last five years, coupled with a keen emphasis on high quality premium space, has seen start-up businesses priced out to the fringes of London. Even the traditional ‘safe haven’ of Shoreditch is proving out of reach for the capitals newest innovators. There’s a fear that London Landlords demand for excessive rents will begin to drive these young companies away from the city as they seek better value for money elsewhere. In venturing outside of London start-ups will not only find cheaper office space, but also a cheaper cost of living, beneficial to both their budget, and their employee’s satisfaction.
To counteract these movements, Landlords across London are going to have to get proactive and begin to provide the office space that start-ups are crying out for. London is Europe’s leader in the tech and creative industries, and yet it still fails to attract the overseas business you would expect. This is due to the widening gulf between what start-ups want, and what London can actually provide. Instead of racing to achieve record rents, Landlords need to take into account the budget and needs of start-ups, something that would benefit both parties in the long run.
At present, flexibility is the word on everyone’s lips and we’ve seen huge increases in shared office spaces, coworking spaces and similar platforms. This has been driven by the unending need for flexible and affordable workspaces. Coworking already accounts for 5% of London’s office market, with serviced/shared offices accounting for over 5 million sq ft of office space as of May 2015; and with demand remaining high this looks only likely to increase.
The serviced office model may not appeal to every tenant, but it does alleviate some of the potential risks they face and gives Landlords a platform to generate income far exceeding that of a traditional lease. This is a win-win situation for both tenants and Landlords; the former getting the flexible office space they desire, and the latter receiving secure income from continually high occupancy. WeWork and The Office Group are two providers who have creative partnerships with Landlords, offering the type of serviced office space that start-ups need at price they can afford. They in turn can afford to rent more space from Landlords, expanding their portfolio and keeping both Landlords and tenants happy.
