Setting up an office in London will seldom be as straightforward as calculating your cost by multiplying your quoted desk price by the number of staff members. Most workplace providers will give you the cost per month on a desk basis, but that will just be the beginning of your costs. You will also have to factor in VAT, deposit, meeting rooms, and other additional services not covered in the membership package.
The end price can also be quite different based on your choice of location for setting up your team. An office desk in Shoreditch is going to be a completely different price compared to one in Mayfair, even when provided by the same workspace company. Getting to know what the monthly payment includes and doesn’t include will allow you to make a good comparison.
The headline number, and what it hides
The current listings data for the marketplaces suggests that rates for a dedicated desk in London currently start at £224 per month per individual and go all the way up to £1,024 per month per individual. They are live marketplace listings and not overall average numbers for the market.
The large disparity in prices can be explained by two aspects. The first one is location. Rates for coworking spaces in London vary more by district than most first-time occupiers expect. High-end locations like Mayfair, Canary Wharf and the City of London tend to have prices that are significantly higher compared to locations like Shoreditch or Southwark. The second aspect is operator category. High-end spaces have facilities that are better equipped and better service provision compared to independent operators.
The quoted rates also become hard to compare due to differences in the way that each operator packages their services.
What sits on top of the quoted rate
VAT
Most often, VAT on workspace membership is 20%, unless otherwise stated. If VAT on desk membership is excluded, the price will be £450, while the price becomes £540 if VAT is included. The cost can increase by £5,400 for ten individuals if VAT is included.
Some providers include VAT in their pricing while some don’t.
Service charges and meeting room credits
Flexible workspace memberships normally offer an allocation of time for meetings, though such allocations are rarely unlimited. When the allocated time is exhausted, extra time spent will be charged additionally. Some of the services that may not be included in flexible workspace memberships include printing services, storage, guest access passes and extended hours.
Deposits and setup
A security deposit is also an almost universal requirement for most operators before the commencement of occupancy. The typical requirements of the current operator usually range from a refundable security deposit that is equivalent to one to three months’ worth of membership fees, based on the length of contract and business profile of the operator.
How district changes the maths
The choice of the area within London does not depend only on the cost of renting. This decision impacts the hiring process, commuting time, ease of access for clients, and the company’s image in general.
The marketplace includes many different areas of businesses, for example Mayfair, St James’s, Canary Wharf, City of London, Soho, Fitzrovia, King’s Cross, Victoria, Paddington, South Bank, London Bridge and Shoreditch. The more prestigious places tend to be more expensive as the businesses appreciate their prestige and good transport connections, along with being near their customers.
Affordable locations can offer great value to growing companies, especially if they use a hybrid working model. But then there is the issue of recruitment. The cheaper location makes it hard to recruit employees or add additional time to the commute.
Flexible versus a conventional lease
A flexible workspace tends to be more expensive on a per-desk basis compared to renting a regular office space, but the comparison is not so simple as the pricing aspect alone. A usual lease for a London office is usually between five and ten years, meaning the company will need to lease the office despite fluctuations in their number of employees.
Leases also bring along hidden costs which are not always considered in the first year budget. The dilapidation charge would mean that the tenant would be obliged to return the office space to its original state upon termination of the lease.
A flexible work environment takes a lot of the risk on the operator’s shoulders. Companies have to pay more on a monthly basis for each desk, but they do not enter into a lease agreement for a long-term period, incur costly fit-outs, or face numerous building costs. It is up to you whether such an expense will be justified by how sure you are of the number of employees you will hire over the next two years.
A realistic budget for a ten-person team
For example, let’s take a company that takes up ten dedicated desks for £500 each per month for a medium London workspace. The desk cost per month without VAT will be calculated as £5,000, and including VAT, it is £6,000. Hence, the annual cost works out to approximately £72,000.
It is also essential to budget for extra meeting room hours outside any monthly credit included in the package. A further allocation of £300 per month for extra use of meeting rooms will amount to an annual allocation of £3,600. In addition, the operator may ask for a two-month deposit that will cost you £10,000 without VAT before you can move in. These figures are purely illustrative, and actual quotations will vary depending on location, operator, contract length and the services included.
Conclusion
In the case of budgeting for an office in London, the desk rate should be seen as the first step and not as the bottom line. The decision of which area to pick due to the possibility of recruiting and meeting potential clients is more significant for the long term than finding the cheapest monthly cost. Compare the different vendors based on their annual cost, see what is actually included, and choose how many years your contract will last based on your confidence in your employees in the future. That approach is far more likely to produce a realistic workspace budget than focusing on the headline desk rate alone.
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