Choosing the right office location is a critical decision that can significantly impact a business’s bottom line. In a city the size of London, cost disparities between Central London and Outer London areas can be substantial, and the options should be carefully weighed to ensure optimal alignment between location, how much space you need, budget, and overall value.
In this article, we analyse the cost differences between leasing office space in Central London and in Outer London areas.
Central London Offices: Status at a price
Generally speaking, Central London refers to the areas within Zones 1 to 3 (London Underground).
With nearly 290 million square feet of office space, Central London is one of the world’s largest and most prestigious business locations. This is a very active market with pre-lettings making up approximately 30% of all office-related transactions, which shows that companies that can afford it secure the top options well in advance.
More recently, a flight-to-quality move has seen the best-in-class assets being taken up by insurance, finance and banking firms, who have the means to pay the hefty price tag that comes with these properties.
Currently, prime office space in some of the most desirable Central London areas command triple-digit rates. For example, St James’ in the heart of the West End has average rates of £125 / sq ft.
In Mayfair, a recently signed deal became the highest rent paid in the city for office space at £277 / sq ft.
Also remarkable are the prime rent levels North of Oxford Street and the W1 postcode, with averages of £100 / sq ft.
Outer London: Affordability and potential
Outer London includes the boroughs of Barking and Dagenham, Barnet, Bexley, Brent, Bromley, Croydon, Ealing, Enfield, Greenwich, Haringey, Harrow, Havering, Hillingdon, Hounslow, Kingston upon Thames, Merton, Newham, Redbridge, Richmond upon Thames, Sutton, and Waltham Forest.
The inauguration of the Elizabeth line in 2022 helped generate interest in offices located in western Outer London locations, from Ealing to West Drayton. For example, in Hanwell and Southall it’s possible to find private office spaces in the low £30s / sq ft, whereas rates drop to the mid £20s / sq ft in West Drayton or Ealing.
Improved transport options had a similar effect in southeast Outer London. For example, asking rates in Abbey Wood are in the high £20s / sq ft. Similar rates can be found in Romford, also served by the Elizabeth Line. For comparison, office rental prices here are more than 10 times lower than the £277 / sq ft paid in Mayfair, which despite not being representative of the average cost, indicates the wide disparity between Central and Outer London office rental rates.
Having said that, not all Central London offices cost hundreds of pounds per square foot. To rent office space in central locations like Aldgate and Hammersmith is still under £60 / sq ft. In King’s Cross, Midtown, Victoria, and Holborn average rates are £80 / sq ft. Other options slightly further away, like Battersea or Hackney, have average rates of £35 / sq ft for serviced offices, which are rather on par with some Outer London locations.
Comparison by office class
Location alone isn’t the only factor that contributes to price differences, since office class also plays an important role across all major UK cities. Generally speaking, Grade B office spaces in the city centre command similar rates to Grade A space in Outer London locations.
For example, Grade B Chelsea offices average £35 / sq ft, which is on par with Grade A space in Hackney, Battersea, and most of Outer London.
On this note, we must mention that per sq ft prices for Grade B space across most London sub-markets have dropped evenly by 10% to 20% since 2020.
Business rates
Another factor to add to our cost comparison exercise are business rates, which are determined by local authorities and can differ significantly between London boroughs.
Business rates aren’t fixed, but subject to revaluation. In 2022-2023, the average business rate increase for Central London offices was 7.5%. However, rates have declined in some areas, as is the case of offices in Canary Wharf, where they’re 10% lower than the previous year.
For budgeting purposes, it’s worth mentioning that business rates in fringe and Outer London locations increase faster than those in established office hubs.
Flexible office space: Cost-effective in both Central and Outer London
Lastly, we look at how the cost comparison fares without the commitment of long-term leases. As a general rule of thumb, desk rates in serviced or Central London flexible office spaces can double the rates of those in Outer London.
For example, in Q4 2023 the city average was £625 desk/ month, yet desks in prime Central London locations are typically in the £700-£900 desk/ month range. On the other hand, average rates for flexible office spaces drop to £400 desk / month in Southbank or Aldgate. Compare this to the monthly rates of £200 to £300 / desk in Outer London locations like Croydon, Kingston, or Enfield.
Conclusion
When comparing the cost of office space in London, it’s important to consider location, office class, and business rates, as well as general trends in different sub-markets. Researching the options and exploring different alternatives can help ensure you make a strategic choice for the right office space that takes your business forward.
Need help narrowing down the location for your next London office space?
Looking for physical or virtual office space with Central London postcodes? Or would you prefer a Greater London borough location? We provide a wide range of options for serviced offices and workplaces. You can also call us at 020 3965 9617 to talk with a member of our courteous team of specialists. Our office space professionals will assist you and your business in finding the best office in London to meet your specific needs.
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