When starting to look for commercial property to let, it is always important to know what the average cost per square foot is and this article aims to outline these costs in London’s most popular office space locations – the West End and the City. It will also look at what affects these costs and what the square footage cost actually includes.
As of November 2010, commercial property rates in the West End could range anywhere between £50-£70 per square foot for prime Grade A space – but an average of around £65 is probably about right. For the City, it’s around £45-£55 per square foot. The West End is usually more per square foot than the City, and "prime" usually refers to a new build, or a completely refurbished building in a prime location. For lower quality Grade B buildings and locations, space is generally listed at approximately £20 per square foot less than prime Grade A space. Please note that these prices quoted are only rough guides.
So what affects the square footage costs?
The three key factors are location, building specification and the shape of the floor plate. The two main ones, location and building specification are fairly self-explanatory – the better the location and the higher the quality, the more tenants will pay.
The third factor, the shape of the floor plate, is an interesting one and ties in functional obsolescence. Nowadays, companies are looking for commercial properties to let that have fairly deep floor plates that can be converted into open plan offices. This is a reflection on modern working practices and the movement away from cubical style offices. Functional obsolescence comes into play when the floor plate is narrow and is not able to deliver on the requirements for an open plan office. This means that tenants are only left with a narrow space for an open plan layout once they have installed their offices, thus they are not getting maximum occupational density out of the space. In addition to this, there is also technical obsolescence; the age of the mechanical and electrical installations (M&E) and these can include various building installations and cabling etc.
What is included in the square footage cost when looking for commercial property to let?
Unfortunately, not much – square footage costs only cover rent – it’s merely the payment for the exclusive possession of the demise. It will exclude all running costs, repairs, all taxes, utilities and liabilities just to name a few. Generally speaking, companies can feasibly expect to pay approximately double the rent for the additional costs. For instance, if tenants are paying around £65 per square foot for prime West End office space then, most likely, they are looking at around £120 – 130 per square foot including rent, rates and service charge and all capital and operational costs.
Independent commercial property agents like APM Property Consultants offer turnkey and management leases throughout central London and the South East, providing clients with vital knowledge and expertise pertaining to the commercial property industry. APM Property Consultants currently market over 190,000 sq ft of prime office space, the majority of which is in London’s City and West End.