Square Mile ideal for SMEs but their strong growth is placing pressure on office space
- Square Mile ideal location for SMEs, but their rapid growth in the last few years has put pressure on the available stock.
- The misconceptions about the City being an expensive place for office space need correcting.
- All businesses, particularly SMEs, face issues finding suitable office space in the smaller 300 – 1000 square metre (sqm) region.
- Developers should be encouraged to introduce more SME-subsided units in large-scale buildings.
A report published today (16 March) for the City of London Corporation, the Square Mile local authority, 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 and the City Property Association (CPA), 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.”
Notes to editors
The full report can be found here
About the City of London Corporation
The City of London Corporation provides local government and policing services for the financial and commercial heart of Britain, the 'Square Mile'. In addition, the City Corporation has three roles:
- We support London’s communities by working in partnership with neighbouring boroughs on economic regeneration, education and skills projects. In addition, the City of London Corporation’s charity City Bridge Trust makes grants of around £20 million annually to charitable projects across London and we also support education with three independent schools, three City Academies, a primary school and the world-renowned Guildhall School of Music and Drama.
- We also help look after key London’s heritage and green spaces including Tower Bridge, Museum of London, Barbican Arts Centre, City gardens, Hampstead Heath, Epping Forest, Burnham Beeches, and important ‘commons’ in south London.
- We also support and promote the ‘City’ as a world-leading financial and business hub, with outward and inward business delegations, high-profile civic events and research-driven policies all reflecting a long-term approach.
See www.cityoflondon.gov.uk for more details.
About the City Property Association
The City Property Association is a membership body open to all companies working in and around the City of London’s real estate industry. With close to 200 members, we bring together property owners, developers, investors and professional advisors to inform policy and drive the economic prosperity of the City, and between our members we represent a substantial property portfolio. Our principal focus continues to be planning and economic development policy in the City and we maintain excellent working relationships with members and officers in the City of London Corporation, the Greater London Authority, media and key industry bodies. We also take an active interest across other various government departments as well as national and regional organisations that impact upon the built environment in Central London. Each year the Association delivers a range of insight seminars, building visits and seasonal receptions. These events bring together our membership to forge new business partnerships and are an opportunity to hear directly from senior policy makers and industry experts. Visit our website www.citypropertyassociation.com for more details on membership.