Location, location, location

Last month a St James’s Square office development in London’s Mayfair succeeded in commanding the most expensive rent in the world, a staggering £1500 per m2 (£140 per ft2 per year). It is safe to assume that since its design consultancy Morey Smith put the finishing touches to the LEDs in the glass reception desk, no design group will set foot in the building again until it needs a revamp.

Andrew De Groose, who describes the St James’s Square rent as ‘crazy’, is managing director of Shoreditch-based digital design consultancy De-construct. ‘When I hear the rents that people are paying in Soho or Covent Garden, I think, “What are you doing?”‘

Although 12 St James’s Square sets an unnatural high for the Westminster borough, according to anecdote many creative groups in the centre of London pay rents of about £540 per m2 (£50 per ft2), at least twice as much as those in neighbouring areas.

In Shoreditch and Hoxton, just east of the City, studio space costs about £270 per m2, (£25 per ft2) or lower. In the fashionable Tea building, home to private members club Shoreditch House, rents cost as little as £160 per m2 (£15 per ft2).

With low rents so close to the centre of London, Westminster City Council is rightly concerned that these areas have been leeching creative businesses away from its borders. It is currently drawing up an action plan to keep those that remain, even mooting the idea of subsidising rents.

The council’s recently published report to this end, Westminster’s Creative Industries (DW 22 November), concludes that the borough’s long-standing policy to protect light industrial space for the use of creative companies ‘needs to be reconsidered’, since ‘very few creative businesses actually use this type of space’.

One design consultancy that recently inhabited exactly this type of space – the former Aquascutum tailoring studio in London’s Piccadilly – disagrees. HMKM managing director Alison Cardy says, ‘If you want to inspire people and express your character as a company, your physical surroundings are very important. An anonymous office building can infect a company with its anonymity. When you are a design group working with strong brands, you have to be a strong brand yourself.’

HMKM moved to its Soho office last year, following an ‘inflated’ rent hike. ‘Companies like ours can’t stand high rents,’ Cardy says.

However, after searching for a new location for its studio on the edges of central London, HMKM decided that ‘we definitely are a W1 kind of a consultancy’.

There is a historical element to today’s presence of design groups in the West End. Soho has been a creative centre since furniture-makers, tailors, painters and silversmiths began to populate the area in the 17th century, soon after it gained its current street plan.

This is one of the factors that drew the organisers of London Design Festival to move their offices to Soho’s Frith Street earlier this year, from their previous location in the City. ‘We feel that it was important for us to be in the centre of London, with the history of design being here,’ says LDF director William Knight.

But if Westminster suits some companies, it makes equal sense for others to go elsewhere, claims De Groose. He says of Shoreditch, ‘It is more gritty here, and like a lot of digital businesses, we like to think we are separate from the mainstream. There is also a good stock here of open-plan, well-lit studio spaces with the kind of low price tags that attract young businesses.’

Westminster believes that the answer to retaining its creative companies could lie in a blend of rent subsidies and low-rent creative developments, such as Paddington’s Great Western Studios, home to 70 design groups and artists.

Rent here is just £130 per m2, (£12 per ft2) but for good reason: the building is owned by Network Rail, which stipulates six months’ notice as part of the contract. Directly in the path of the new Crossrail development, which received the go-ahead this autumn, GWS expects to have to vacate as early as the end of next year.

GWS manager Adam Withington reports that Westminster City Council is ‘very keen to keep us in the borough, and is applying sharp elbows to Crossrail to help find an alternative location’, but he admits that it is going to be ‘very difficult to rehouse us and keep such a low rent offer – there simply aren’t suitable options available in west London’.

For now, those able to afford West End rents, and who deem it essential for their businesses to be there, will continue to pay the price. However, if 12 St James’s Square proves to be more than an anomaly, Westminster City Council could find itself swallowing an unpalatably large rent bill on behalf of its creative tenants.

The creative heart of london

• According to research by the council, there are 754 creative services businesses in Westminster

• Of these, 56% have a turnover of less than £1.5m. According to a business telephone survey carried out on behalf of Westminster City Council, a further 30% had a turnover of between £1.5m and £7m

• 65% have four or fewer employees and there are only eight businesses with more than 200 employees

• When asked about the future of their market and their business, 73% believed the market would grow over the next five years, while 24% thought it would stay the same

• 94% of creative services businesses have been trading for more than two years, with only 1% trading for less than 12 months

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