LONDON’S startups are under pressure. While many focus on rising prices in the capital’s residential sector, office space is little different. It’s a landlord’s market – only 4 per cent of offices are vacant in the West End, commercial property is being converted into flats (in Westminster alone, a million square feet is undergoing conversion) and, says Matt Oakley, head of commercial research at Savills, “the market is swinging against the startup. They are being pushed further and further out the established areas.” Even the much-discussed Silicon Roundabout is becoming less accessible. Rents are rising, as hype increases and the big corporates move in.
So where to base your firm? Oakley says rents can still be reasonable in the West End, and around Old Street and Farringdon. “While the top end of the West End can cost £100 a square foot per month, you could be looking at £25 in Notting Hill. And that’s for good space. Monthly prices fall to £10 to £15 per square foot in fringe areas.” But this is still a lot. Renting an office often requires a reference, plus six months paid up-front. If your product is insecure, and you haven’t any customers, why tie up money that could be better spent on product development or market research? The reality is that many startups find it difficult to move from the home to more established premises. But there are alternatives.
Startup hubs are a good place to start. East London Small Business Centre, for instance, rents outs affordable business units in the Aldgate area, with a three person suite at £575 per month. If you want to keep your overheads even lower, it also offers virtual office solutions for £99 per month. This gives your firm the credibility of a central London address without the need to rent physical space.
Co-working offices are another route. Club Workspace charges for desk space much like you’d buy a gym membership. You can quickly grow (or shrink) how many workstations you need, and associated networking opportunities may prove useful. It has branches at London Bridge, Bankside, and Clerkenwell (among other locations).
But while choosing a business location is arguably one of the most important decisions a startup can make, given current prices, it may also be a decision worth putting off if you’re still finding your feet.
Tom Welsh is business features editor at City A.M.