Small- and medium-sized enterprises (SMEs) in London are finding it more difficult to find affordable commercial space, as rents in the city rose by £2.11 per square foot so far in 2018.
Experts said that office rents in the city now cost £62.11 psf from £60 psf year over year. A strong demand for office space partly causes more expensive rents, which then affected the office absorption rate in the capital.
Year-to-date office absorption in London fell 10 per cent on an annual basis to 1.8 million square feet. MS Webb & Co. cites that while the decline indicated that prices have been too high, some landlords may have decided to evict tenants due to a forfeiture of a commercial lease or other reasons.
Despite the drop in office take-up, the demand for commercial spaces remains strong, particularly from the professional service companies and the tech and media sector. This led other industry experts to be fairly optimistic about the commercial property market. Despite more expensive rents, some companies are willing to pay a premium for renting the best buildings. SMEs, however, are forced to find other ways to adapt in the city.
Shared Office Space
Shared working spaces and serviced offices comprise some of the alternative solutions for the sky-high office rents in London. Start-up companies are leading the charge in taking up co-working spaces, while others are opting for virtual offices.
This provides them with a lifeline since high rents are not the only problem, but also the rising cost of doing business in London. By 2023, the business rates bill in the capital is expected to increase by £1.4 billion.
Landlords should consider new ways of leasing space for SMEs, whilst ensuring that tenants will not be problematic. Those who are dealing with troublesome occupants may always consult with court enforcement service providers.