Wanted: light, airy, open-plan office space in central location close to public transport. Sounds simple enough. But not if you’re a consultancy trying to move in central London. You may as well forget Soho and cross your fingers in the hope of finding something north of Oxford Street or, should the worst come to the worst, south of the river.
According to estate agents, things really are moving. The market is changing from being tenant-led to landlord-led, with rents rising and leases becoming less flexible, which is bad news for the growing number of consultancies looking for larger studios.
Apart from increasing demand for appropriate premises, it seems landlords and developers just aren’t tuned in to the needs of designers. “The market is generally tightening up for design groups,” comments Darren Best, a senior negotiator with agent Savoy Stewart. “Soho has gone mad. We’re finding lots of consultancies don’t need to be in Soho and they’re looking north of Oxford Street, which is cheaper.”
According to Judi Green, managing director of The Green House, which recently moved to Langham Street, north of Oxford Street, spaces are more flexible too. “Soho is incredibly expensive. There’s not a lot of space left and what there is is on the small side. It’s also very noisy.” Green viewed many sites in numerous locations to no avail before stumbling upon the Langham Street building after spotting the agent’s board.
“A lot of offices we saw were decorated in a way that is totally inappropriate for a design studio – naff carpets, awful lighting and really bad fixtures and fittings. We wanted more of a shell,” she adds. After much negotiation on the Langham Street site, The Green House secured a five-year lease for a very reasonable rent of 11 per sq ft plus a rent-free period to account for the considerable outlay in refurbishing the space. The consultancy has got an open-plan studio, plenty of light and has added a meeting room and kitchen. “It was originally a cluster of sweatshops and has a chunky, urban feel to it,” declares Green.
Most agents will agree that landlords rarely cater for designers’ needs. “Basic open space is what they want. The problem is, when that comes on to the market there are usually three or four people waiting for it,” says Best.
David Jackson of estate agent Pilscher Hershman agrees: “Finding the right sort of building is difficult. The general problem is educating developers to refurbish buildings to suit architects and designers. There is a tendency to do a corporate office scheme. Developers like suspended ceilings; designers and architects want it a bit raw.”
One way around the obvious gap is for designers to take on run-down space that can be refurbished to their taste and, like The Green House and others, negotiate more favourable rent and even a rent-free period. “Even though it may cost a lot more to start with, over a period of four to five years you end up saving money,” says Best.
Jackson, who specialises in “creative” clients, believes the current shortage is also due to many consultancies deciding to expand now that their books are getting fuller. “[Consultancies] have taken the longest to have the confidence to expand.” Rents, not surprisingly, are going up and leases are getting longer. Prices for Soho space are topping 25 per sq ft, with north of Oxford Street reaching 18 to 20 per sq ft. Clerkenwell, the other favourite central London spot for designers, is much more reasonable, although rents are rising beyond the 10 per sq ft barrier.
The West End, however, remains a firm favourite for many consultancies which want to be central for clients and conveniently located for staff. Richard Williams, director of new consultancy Williams Murray Banks, wanted to be “in the middle” after spending many years on the fringe of the City at Clerkenwell. High on his list of criteria is a location which is easy to walk to and safe; likewise 20/20, which has been searching for the right site for a year. The consultancy has outgrown its Camden office and is looking for 10 000 sq ft at a target rent of 15 to 17 per sq ft.
“Designers actually want something that can be refurbished because you want some input of your own,” comments 20/20 company secretary Selina Mathieson. “The sort of property we’re looking for probably isn’t on anyone’s books. We’re not looking for suspended ceilings and carpet tiles. We want a character building, not an office block. And we want our own front door.”
Mathieson has looked at almost 40 different buildings but none of them are right. Now the consultancy is even considering a freehold space if the right opportunity comes up. “We started off with a very long wish list, but you soon realise you can only have all those things if you move somewhere like Northumberland.” She acknowledges that London Docklands would offer more flexible space, but questions how many staff would want to work there.
As space becomes prime, so leases get tougher. As agent Lionel Simmonds of Simmonds Heath & Co points out, “the pendulum is swinging back to the landlord”. Leases often come with “mutual options” rather than “tenant options” and landlords are favouring ten-year leases as opposed to the more common five years or less during the recession. But the memory of crippingly high rents and 25-year leases, or the burden of a freehold office, is too fresh for many design groups, and even ten-year leases are usually negotiated with a five-year break.
However, Williams, who has been negotiating on a site overlooking Oxford Street, finds the whole issue of leases a minefield. Even finding out who the landlord is has proved a hurdle, because many office spaces are on sub-leases of sub-leases. So getting approval for building work means going up the chain.
The 1300 sq ft space Williams is after is described as a “decent quality shell” with a shared reception, and is a bargain 8.50 at per sq ft for a six-year lease with two-and-a-half-year get-out clause; prices are rising even as Williams is negotiating the terms of the lease. The group will need to spend up to 20 000 on refurbishing the office to create a studio, board room, quiet spot and a “sandwiches” area.
“We’ve been looking at issues such as hot- desking – often up to a third of the office can be empty because people are out all the time. When you’re setting up, space is one of your biggest costs after salaries.”
Tomato has been lucky enough to find new premises in Soho – but at a price. The group was desperate to expand after doubling its turnover every year for the past four years. It took two years from the initial search to the move earlier this year. “We wanted a warehouse space but we never found it,” says managing director Steve Baker. “When we found this building we had to realise the potential. It had a lot of small editing suites and it had a terrible feeling to it, but I liked the location,” recalls Baker.
The negotiated rent is “confidential”, but the group has spent 100 000 on refurbishing the 6000 sq ft building on Lexington Street.
The refurbishment isn’t quite finished, but, declares Baker, the space has been transformed into a “beautiful building”. He finds it hard to understand why landlords get nervous about designers refurbishing space. “Landlords don’t understand at all. They spend their lives covering up floorboards and walls.”
Baker’s negotiations involving solicitors, surveyors and the landlords also took far longer than he had anticipated. “You have to be patient and you have to fight for what you want,” he declares.
Despite being choosy, designers will have to be quick; as Best points out, “it’s not like a year ago when you had more choice”.
Don’t jump into a lease that you will later regret just because space is hard to come by. Here are a few vital points to consider before signing on the dotted line
Don’t fall in love with a building – it may not end up as yours
Set a budget and stick to it – don’t get caught out by escalating rents
Open-plan spaces on one floor usually make better studios
Stick to locations which are easily accessible and safe to walk to
Don’t sign up for more than five years without a get-out option
Find out who the landlord is and what refurbishment potential the site has
Push for a rent-free period if refurbishment will improve the building
Check how high the business rates are
Watch out for extras such as service charges and rental deposits