How Much Does It Cost to Rent Office Space?

The cost of renting office space depends on much more than the figure at the top of a property listing.

Location, office size, the type of agreement, building specification, and what is included in the price can all change what you actually spend. Two offices with similar desk capacity can therefore have very different total occupancy costs.

When comparing offices, put each option on the same monthly or annual basis and include the costs that sit outside the advertised rent. That gives you a much more useful comparison than the headline figure alone.

Start With the Total Cost of Occupying the Office

Office space is priced in several different ways.

Traditional commercial offices are commonly marketed using rent based on floor area. Flexible and serviced workspaces may instead be quoted as a monthly price for the office or on a per-desk basis.

None of those measures tells you everything on their own.

A lower basic rent can be accompanied by separate bills for service charges, business rates, utilities, internet, furniture and fit-out. Another workspace may package some or all of those items into one monthly charge.

Start by breaking the cost into the following areas.

The precise combination depends on the office you choose, so the quote should always be read alongside the occupancy terms.

What Determines How Much Office Space Costs?

There is no reliable single UK figure that applies to every business. Office markets differ considerably between cities and even between neighbouring London districts.

Several factors have a direct effect on the price.

Location

Where you rent is one of the biggest variables.

Central locations with strong transport connections and access to established business districts can command different rates from offices further out. Within London, prices can also vary considerably from one neighbourhood to another.

That does not mean the lowest-priced location is automatically the best financial choice.

Think about what the location means for commuting, recruitment, client meetings and how frequently your team needs to travel elsewhere. A cheaper office that creates a difficult journey for most of the people using it may offer poor value in practice.

For businesses comparing flexible workspace rather than entire offices, our guide to how much it costs to rent a desk in London provides another useful way to think about location and workspace costs.

How Much Space You Need

More floor area generally means a larger overall commitment, but simply counting employees is not enough to establish how much space you need.

Consider:

• how many people are in the office at the same time
• whether employees have fixed or shared desks
• meeting room requirements
• private areas for calls
• storage
• breakout space
• circulation around desks
• expected recruitment

If your team works on a hybrid basis, peak office attendance may be more useful than total headcount when planning space.

A layout that technically fits 20 desks may still be unsuitable once meeting space, storage and comfortable circulation are taken into account.

Condition and Fit-Out

A fitted office and an empty floor are not directly comparable.

An apparently inexpensive space can require spending on desks, chairs, meeting rooms, cabling, partitions, decoration and other works before anyone can use it comfortably.

Conversely, a workspace already configured for occupation may carry a higher headline cost but require less initial setup.

When viewing a property, establish exactly what will remain in the office when you move in and what you will need to provide yourself.

The Length and Structure of the Agreement

Price is only one part of the commercial arrangement.

Look at the minimum commitment, notice provisions, deposit requirements and any break options available to you.

The RICS Code for leasing business premises is intended to help landlords, tenants and advisers understand the commitments involved when negotiating or renewing qualifying business leases in England and Wales.

The practical question is whether the terms would still make sense if your space requirements changed during the agreement.

If you are entering a conventional commercial lease, consider taking appropriate legal and property advice before committing. The exact responsibilities and financial consequences depend on the individual lease.

Which Extra Office Costs Should Go Into Your Budget?

Once you have the rent or workspace price, look for costs sitting outside it.

Business Rates

Business rates can form part of the cost of occupying commercial premises.

GOV.UK explains that business rates are charged on most non-domestic properties, including offices. The system is handled differently in Scotland and Northern Ireland, so businesses should check the rules that apply where their property is located.

Do not assume that the figure advertised for an office includes business rates. Equally, do not assume you will necessarily receive a separate business rates bill.

Who is responsible, and whether the cost is paid directly or reflected within a wider workspace charge, depends on the property and occupancy arrangement.

Ask the landlord or workspace provider to clarify how rates are dealt with before comparing quotes.

Service Charges

In multi-occupancy commercial buildings, tenants may also contribute towards the cost of operating shared areas and building services.

The exact items covered vary between buildings and agreements.

The current RICS standard for commercial property service charges sets out professional standards intended to promote greater consistency, transparency and good practice in service-charge management.

If a service charge applies, ask for a clear breakdown of what it covers, how your contribution is calculated and which building costs remain outside the charge.

Utilities, Internet and Day-to-Day Services

Electricity, heating, water, broadband, cleaning and waste collection all contribute to the real cost of running an office.

Some workspace arrangements include these. Others leave the occupier to arrange or pay for them separately.

That is why two monthly prices should not be compared until you understand exactly what sits behind each one.

Moving and Setup Costs

There may also be one-off expenditure before the regular monthly costs begin.

Depending on the workspace, this could include:

• furniture
• IT installation
• removals
• decoration
• partitions or meeting rooms
• signage
• professional advice
• deposits

Not every office will involve all of these costs, but identifying them early gives you a more realistic budget.

How Serviced Office Pricing Changes the Comparison

Serviced and flexible office providers can package property costs differently from a conventional commercial lease.

Instead of arranging a series of separate building services, you may pay one agreed workspace price that incorporates a number of them.

That does not automatically make a serviced office cheaper or more expensive. It simply means the two options need to be compared on an equivalent basis.

At Purpose Group, our buildings use an all-in cost model. The exact workspace and facilities available depend on the individual building and office, so it is still important to confirm what applies to the space you are considering.

Our guide to all-inclusive pricing for office space explains Purpose Group’s approach in more detail.

When comparing an all-in workspace price with a traditional lease, identify the separate occupancy costs attached to the traditional option first. Otherwise, you may be comparing figures that cover different things.

How to Compare Office Quotes Without Missing Costs

Putting every quote on the same basis makes differences much easier to spot.

Before choosing between properties, answer the same questions for each one:

1. What is the regular rent or workspace fee?
2. Which property costs are already included?
3. Which costs will be billed separately?
4. What will you spend before moving in?
5. How long are you committing to the space?
6. What happens if your team needs more or less room?

Also check whether quoted figures are stated inclusive or exclusive of VAT where VAT applies. VAT treatment can depend on the property and transaction, so do not assume that two advertised prices are presented on the same basis.

For a practical comparison, create one column for recurring monthly costs and another for one-off setup costs. Furniture, fit-out, deposits and removal costs are then much harder to overlook when you place two offices side by side.

Once every option is measured in the same way, the cheapest-looking property may no longer have the lowest total occupancy cost.

Where Office Budgets Can Go Wrong

One common problem is calculating space purely from total headcount rather than the number of people who will regularly use the office.

Another is comparing a fitted, managed workspace with an unfitted commercial lease as though they were equivalent products.

Upfront expenditure can also be underestimated. A significant fit-out changes the overall cost of occupying a property, particularly when you spread that investment across the period you expect to stay there.

Location should not be reduced to rent alone either.

An office is used by people. Transport connections, accessibility and the surrounding area all contribute to whether the workspace is practical for your team and clients.

Alpha House as a London Office Option

If your search is focused on London Bridge or Borough, Alpha House is one Purpose Group location worth considering.

It provides flexible serviced office space for SMEs near Borough and London Bridge stations. Alpha House also uses our all-inclusive pricing approach, while current pricing and availability can be confirmed directly with our team.

Rather than relying on a generic London average, you can assess the current options at Alpha House against the space, location and facilities your business actually needs.

If London Bridge or Borough works for your team, view Alpha House and enquire about current office availability and pricing.

What Should You Ask Before Agreeing to the Price?

Before committing, make sure you can answer the following:

• Is the quote for the whole office, per person, or based on floor area?
• What exactly is included?
• How are business rates dealt with?
• Does a service charge apply?
• Who pays for utilities and internet?
• Is the space already fitted and furnished?
• Are meeting rooms included or charged separately?
• Is the price inclusive or exclusive of VAT where applicable?
• What deposit is required?
• What are the minimum term and notice provisions?
• Are there costs associated with changing the space later?

If you are unsure about a tax, legal or lease obligation, confirm it with the relevant provider or suitably qualified adviser rather than relying on an advertised headline figure alone.

Work Out the Real Cost Before You Compare Offices

So, how much does it cost to rent office space?

There is no single figure that works for every business. What matters is the total cost of occupying a workspace that meets your requirements.

Start with the rent or workspace fee, add the costs that sit outside it, account for any setup expenditure, and consider how long you will be committed to the space.

Then look at what the office actually provides.

The lowest monthly quote is not necessarily the lowest total occupancy cost. A useful comparison accounts for the space, services, location, and terms your business will actually be paying for.