As the economic recovery has gathered pace, business confidence has continued to grow and demand for London office space has surged. Increasing competition from international companies looking to invest overseas has made space in the capital increasingly difficult to find.
The shortage may intensify further with the new housing and planning bill which aims to provide some much needed relief for London’s housing crisis. The newly announced extended permitted development rights will allow offices to be converted into housing without the need for planning permission.
The prospect to convert commercial space to residential has been made much more financially appealing thanks to vacant property security companies like Oaksure Property Protection. According to their blog on permitted development rights, they are able to save 90% of their clients’ business rates costs.
While this is great news for property developers and home-seekers, vanishing commercial property in the capital could have a negative impact on London industrious reputation. As Emerson Crane Hire say, commercial property density helps the economy through boosting productivity in four key ways: increasing specialisation, healthy competition, large labour markets and a localised wealth of knowledge. Of course, it also means that the remaining commercial property becomes more expensive.
The average rent for office space in central London has hit £55.34 per sq ft. The highest commercial property rents achieved in areas such as Mayfair and St James’s have soared as high as £150 per sq ft. Companies looking to rent office space in London are being pushed to the outskirts of the capital by high prices and low availability.
Short term rentals and business lounges have become popular solutions
Temporary office space allows a business to rent a workspace when it is required for a short amount of time. Short term rentals are usually available in serviced offices which are becoming increasingly popular across the capital.
The UK serviced office industry has increased by 67% and has seen the rise of serviced office providers like Regus and i2 Office who both now offer offices in numerous locations across Central and Outer London.
Business lounges are shared professional workspaces that have also become popular options for companies who cannot afford the sky high rents. They provide deskspace for managing serious work as well as breakout areas for hosting discussions. The external agency running the business lounge usually provides services including reception staff and meeting rooms, often at a prestigious address.
Temporary and coworking spaces are cost-effective working locations for personnel from startups to large organisations. For start-ups with limited resources, turning to coworking spaces makes a lot more sense. The company can access all of the facilities typically found in an office and can work alongside similar startups making networking and collaboration a realistic possibility.
Larger businesses can retain their established UK presence, renting refined business lounges as and when they are required. For presenting a professional image, serviced offices often provide meeting rooms at an address that suits a formal occasion. Previously unaffordable locations such as St Paul’s, Mayfair and Westminster are now affordable locations for business meetings.
The future of London’s office space
The rise of cloud technology has enabled the more flexible working arrangements of coworking. Work can be exchanged and collaborated on electronically via a third-party provider meaning there is less need for all work to be centralised in one office space.
Behind-the-scenes interactions can be completed in the cloud too. Contractor accountants 3 Wise Bears have encouraged the use of cloud software to increase efficiency between startups and their accountants.
The popularity of working in the cloud and the extension of WiFi connections continue to grow. Some have predicted that most of us will be working remotely by 2022 from wherever we choose including the comforts of our own home.
Two thirds of people would rather work from home while 36% of workers would go as far as shunning a pay rise in favour of being able to telecommute. With more employees choosing to work from home, it could spell the end of both the office and the coworking space.
However due to the collaborative potential of coworking it is unlikely to disappear completely. Researchers have discovered that people who work in coworking spaces report levels of thriving that approach an average of 6 on a 7-point scale. This is at least a point higher than the average for employees who do their jobs in regular offices.
If employees continue to collaborate efficiently in coworking spaces, businesses are likely to continue exploiting flexible office arrangements and avoiding the unprecedentedly high London office rents.