Soaring rents could force creatives out of central London

You could argue that the ideal location for a design consultancy is central London. Status, travel links, bars, restaurants and proximity to clients, suppliers and peers are all convincing reasons to be there. But, with office rents in the borough reaching highs of £1400 per m2 a year, a new report by Westminster City Council finds that creative businesses are struggling to justify the expense.

Westminster Council’s head of city planning, Barry Smith, predicts a grim future for the borough if no action is taken to keep property prices within reach for creative companies.

‘If we do nothing, Sony, Google and 20th Century Fox will still be here, because they can afford to compete with the financial sector on rent,’ he says. ‘But we will lose smaller companies and start-ups. They will move to cheaper, neighbouring boroughs. Without the diverse cultural mix, central Westminster will stagnate and become boring. The creative businesses will go, and bars and restaurants would be sure to follow,’ he says.

The report on Westminster’s Creative Industries was launched at last week’s Creative Clusters conference by Sir Simon Milton, leader of Westminster Council. It maps the borough, finding that Soho, Fitzrovia, the West End, Mayfair and St James’s have the highest concentration of creative businesses in the UK, ‘and possibly the world’.

As is usually the case with Government research into the creative sector – and despite this report’s scholarly analysis of individual creative sectors – it does not distinguish design consultancies from other creative businesses because design lacks a standard industrial classification code, or SIC.

Nevertheless, the results of 129 interviews with agencies and architectural practices show that in the ‘creative services’ sector – into which design mainly falls – people overwhelmingly believe that ‘a central London address confers kudos, signals “serious player” status and helps win business and attract and retain talent’.

But the report also asks creative businesses whether the (sometimes low quality) accommodation is worth the high price tag, and it finds a significant number are saying no. Just two of the companies interviewed were in premises built after 2000, with most working in buildings built before 1969. More than 80 per cent lease their premises, with a quarter of these holding leases lasting less than a year. About 24 per cent said that they are considering moving because their rent is too expensive.

Responding to the report, Smith offers several short- to long-term solutions to high rents and poor office environments. Within the next three to four years, work is due to begin on the renovation of the eastern end of Oxford Street, currently dominated by souvenir and discount shops. Smith claims that there are plans to design the office space above the shops to better suit creative groups.

Creative businesses have also been accounted for in Merchant Square, a mixed-use development at Paddington Basin that was granted planning permission this year. Designed by Perkins and Will, the development will contain 55 750m2 of office space and an unspecified number of ‘subsidised light industrial studios’.

But, the idea that is likely to be a hit with design groups is the subsidising of rent for creative businesses in Westminster. The money, says Smith, could come partly from public funding and partly from the fees that property developers are obliged to pay councils to mitigate the effects of construction work.

Finally, a Creative Industries Policy Forum is planned for Westminster next year, allowing businesses and local government to form policies together. ‘This was a strong message that came through at the Creative Clusters conference,’ says Smith. ‘There is a powerful feeling that people don’t talk to each other enough. The council has a role bringing creative companies together to discuss areas of common concern.’

He imagines the forum will meet once or twice a year and consist largely of trade associations representing their creative sectors. ‘It will not be merely a talking shop’, predicts Smith, ‘but will get positive action happening on the ground.’

Talking has its place, but swift financial aid could be the only way to staunch a flow of creative businesses out of Westminster. Ultimately, it is the council that has most to lose if its creative businesses choose to locate elsewhere.

Threats to creative businesses in Westminster

• Increasing competition from creative clusters overseas and in other UK regions can offer better financial terms for smaller companies and start-ups

• Decline in growth – the proportion of creative businesses has been falling in inner London since 1999

• Inflated rental and property costs – because of demand from higher value sectors, rents have grown in Westminster

• Central London is congested and dirty

• Lack of recognition for the creative industries by Westminster City Council – there is scope to reflect the unique contribution of the creative industries to the borough through street furniture, cultural events and more prominent marketing

• Poor business skills within creative consultancies

Source: Westminster’s Creative Industries by GVA Grimley LLP and Burns and Owens Partnership, October 2007

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