London flexible office market is recovering, Rubberdesk report reveals
- The new demand for flexible office space is leading to a reduction in supply, as well as an increase in the cost of these offices in London.
- In London, there is just over 3 million square feet of flexible office space available to let across 2,500 vacant offices.
- The cost of renting a permanent office in London increased by 3.4% quarter-on-quarter to £690 per month in 2022.
Rubberdesk June 2022 Report on flexible office space in London showed that the flexible office market is recovering in London.
While some companies are requiring their employees to return to the office, many other companies are moving towards the hybrid working model. This model allows employees to work from anywhere, but includes the office as a central gathering place.
This new demand is leading to a reduction in the supply of flexible offices, as well as an increase in the costs of these offices across London. The cost of renting a permanent office has increased by 3.4% quarter-on-quarter to £690 per month in 2022.
As pandemic restrictions ease, serviced office operators such as The Boutique Workspace, Situu, Storey, Workpad, The Office Group, Venture X and others have opened over 20 new spaces across London, and 5 more to come over the next few months.
Reduced stocks lead to higher prices in central London
The 5.6% fall in vacant space occurs despite the new additions of a number of operators.
In London, there is just over 3 million square feet of flexible office space available to let across 2,500 vacant offices. Rubberdesk has seen an increase in demand for space in central London, leading to a 1.1% increase in the median rental price for a desk in a private office (£750 per month).
Southwark has the best value at £704 per office, while demand for space in Westminster has driven rents up 7.9% to £830 per office per month.
Businesses are looking for amenities in the city
With the highest density of flexible office space located in the Greater London area, demand has been high among businesses looking for high quality space as well as amenities.
With many companies looking for easy access to transport for their staff, office prices near most metro stations are high. For example, offices within a 10-minute walk of Liverpool Street cost £825 per office, while offices near Barbican Station can be found at rates below the city median at £647 per person .
Although new office supply is on the horizon, prices are still not falling in East London
After hitting a low of £500 per office in May 2021, the median price for renting a flexible office in East London has risen by 18.4%, taking the median rate to $592 per person per month . The increase in prices is somewhat surprising with a net increase of 10.5% in vacant space over the quarter.
Whitechapel in particular offers good value for money, and although prices are up 13% from Q1, the median rate of £479 per person per month (up 13% from Q1) is still well below pre-pandemic rates.
Canary Wharf also has high-quality space at £427 per person, despite a reduction in flexible office space available there.
Pricing for flex spaces in west London remained largely unchanged
Despite a reduction in available office space, west London prices remained unchanged for another quarter. With vacancies down 12.3% from the first quarter, there are now far fewer options available outside of Hammersmith & Fulham, which account for half of all available spaces.
Although the median price remained unchanged at £450, prices in Hammersmith rose by 11.5% to a median rate of £600 per office, significantly distorting the combined rate for West London. This price increase was driven by a 32% drop in available stock following the return of demand. Outside of Hammersmith, businesses will find median rents as low as £275 per person per month.
The new supply of flexible office space has actually kept the price down in South London
Despite a 9.2% quarter-on-quarter increase in vacant space and an 18% year-to-date increase, the median price has remained stable at £300 per person in South London .
While fares are often tied to supply, there is little vacancy in this area, which has led to greater price fluctuations. In terms of price and availability, Wimbledon is leading the way with spaces available for teams of 1-4 at £290 per desk, as well as larger offices for up to 60 people at £477 per desk.
Due to limited supply, 70% of available spaces are for small teams of 1-10, with only a handful of options available for teams larger than 25 people. 65% of the flexible office inventory available in South London is located in Wandsworth and Wimbledon.
Limited supply in North London impacts options
The price of flexible office space in north London remained stable at £395 per office, despite a 3.1% drop in available space quarter-on-quarter.
Tottenham and Finchley currently offer the best value for companies needing a small office and offer a median rate of £144 and £260 per person respectively. Closer to town, rates at Finsbury Park and Wood Green are £425 and £395 per person respectively, and also offer more options for larger offices for teams of up to 50 people.