City office space shortage 17th March 2016

A report published for the City of London Corporation has made a number of recommendations looking at why SMEs base themselves in the City and what issues they face in finding suitable offices.

It found a wide-range of reasons as to why SMEs choose the Square Mile. These included, among others, the dense cluster of businesses which allows them close proximity to clients and customers and access to amenities, the variety of office stock and the competitive prices compared to other parts of London.

From 2013 to 2015 the number of SMEs in the City has grown by 15 per cent and there are now 16,000 based in the Square Mile, accounting for 98.6 per cent of all City firms. However, this has placed pressure on the vacancy rate for office space, particularly for SMEs, with it shrinking to 3.9%, the lowest level since 2001.

In addition, there have been around 800-1,000 start-ups setting up in the Square Mile in the last few years and an average of 1200 SMEs locating to the City in each year since 2011. In particular the telecoms, media and technology (TMT) sector has grown in the City with a 45% growth in jobs in this area since 2010.

The increase in jobs and firms in the City, combined with the loss of smaller space from large developments means SMEs face a scarcity of available office stock. While this demand has pushed up rental prices to £67.50 sq ft in 2015, this does however remain lower than alternatives on offer in the West End (£120 per sq ft), Victoria (£80 per sq ft) and King’s Cross (£77.50 per sq ft).

The report, produced by Ramidus Consulting, for the City of London Corporation, also makes a number of recommendations including: 

  *   Increasing the stock of office spaces between 300sqm and 1,000sqm, and especially those under 300sqm. Over half of the City’s businesses are in office spaces of under 500 sqm, but many smaller spaced units are lost during redevelopments.

  *   Developers increasing the amount of subsidised units within large scale plans. This will happen in the proposals for the planned 22 Bishopsgate with the building hosting 50 desk spaces dedicated to start-ups that are under five years of age. This could be used as a model for further development.

  *   Countering the misconceptions that City rents are overpriced and that the Square Mile simply caters for large corporates.

  *   Improving the provision of broadband, both wired and wires, in the City for SMEs. In January 2016 it was announced that businesses and residents will be able to access speeds of 80Mbit per second, but other areas of the City need to be able to reach such speeds.

Policy Chairman Mark Boleat said: “The Square Mile can offer so much to small and medium-sized businesses: competitive prices, a central location with excellent transport links, a variety of offices spaces, and a dense business environment meaning they can be close to suppliers and customers. But the stock on offer for them is limited as the number of SMEs basing themselves here continues to grow.

“We need to be radical in making sure that the Square Mile can match this demand – increasing the amount of stock available, encouraging developers to think SME first in their proposals and making sure that the City meets the requirements of these dynamic, mobile and ambitious small firms. SMEs are the lifeblood of the City and we need to do all we can to help them flourish and thrive.”