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London calling? Here’s what you need to know about UK commercial leasing

The HubbleHQ Team
The HubbleHQ Team|

If you’re planning a move into the UK market then a London base is a first, vital step. Here’s what you need to know about the UK commercial rental scene to make that move a success.

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Not all leases are the same. In some countries, a lease confers slightly different rights (on landlords and tenants) to those in the UK. Surrounding the lease are a range of costs and conventions that may be unfamiliar to anyone from outside the UK. And then there’s the process of who does what, when.

So if a move to London is next on your organisation’s to-do list, here’s how to make it easier.

What should I rent, and where should I rent it?

Hubble has the largest dataset on London’s flexible office market, together with an unrivalled team of experts to help you use that data to benefit your move into the UK.

So, if you’re searching for a new office and aren’t sure where to start, how much to pay, what’s available, and what sort of spaces your competitors are currently renting, you may find it helpful to start by checking out Flex and the City. It’s our data-driven guide to finding flexible office space in London, and a great starting point for building your knowledge of the UK market.

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Which type of office do I need?

You’ll find more than one type of office in London – and in Hubble’s listings. If you’re planning a move to the UK, you’ll want to know the difference between office types to ensure the space you rent is right for you.

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Serviced office

A serviced office is the ‘plug-and-play’ option, all set up and ready to go from the date you move in. Included in your rental will be utility bills, taxes (most notably VAT, business rates and stamp duty – see below), fixtures and fittings and a range of day-to-day services – for example, security, cleaning and reception (though this depends on the provider).

Find out more about serviced offices 

Managed office

A serviced office may give you everything you need to run your business from day one, but the one thing it doesn’t give you is the opportunity to tailor the space to your own requirements. A managed office delivers all the hassle-free benefits of a serviced office with the added capacity to determine the precise specifications of the building itself. Ideal if you need your office to reflect a particular brand image or culture.

Find out more about managed offices

Leased office

Leases don’t typically incorporate the add-on benefits of a serviced office – you’ll have to supply or arrange everything from furniture to WiFi to a coffee machine – but in return you’ll enjoy a space over which you have more control. It can also be the most cost-effective option for businesses looking to settle in one place for a longer period of time.

Find out more about leased offices

Leasing in London

Every capital city’s property market has its own unique quirks and ways of working. London is no different. Here’s the information you need to help you secure the right lease for your business:

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How long will my lease be?

Typical commercial lease lengths in the UK vary between 5-10+ years. When you’re making a first move into the UK market that can feel like a daunting and potentially restrictive prospect, but it is possible to negotiate a break clause within the lease.

What is a break clause?

Break clauses are an agreement between the parties that one or either party can terminate the lease at a pre-agreed point. Break clauses usually appear in leases of five years or more and are typically exercised at the three-year point of a five-year lease or five years if longer.

Negotiating a break clause can give you greater flexibility and security – particularly valuable when establishing a presence in London. Any clause would be triggered by serving notice, usually six months before the break point. Other conditions may apply to any break clause so checking the terms is essential.

Check out our Commercial Property Guide for jargon-free definitions of other commonly-used office terms and abbreviations you need to know

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The additional costs of leasing office space in London

Your office rental will not be the only cost associated with leasing an office in London. Additionally, you’ll need to factor in the following:

  • Business rates: A municipal tax paid on any building or part of a building used for non-domestic purposes. Budget for roughly 30% of the rental cost.
  • Service charge: A fee charged by the landlord for the maintenance and upkeep of shared parts of the building or estate. Budget approximately £10 per sq. ft as a guide.
  • Deposits: Expect to pay a deposit equivalent to 6-12 months’ rental for a lease in the UK. The deposit is an amount which the landlord may access to cover the cost of damage, rental arrears and breaches (by you) of the terms of the lease, but if unused the deposit should be returned to you at the end of the lease.
  • VAT: Value added tax is charged at 20% on many (although not all) commercial lets. As a VAT-registered business, however, you can also claim back the VAT you are charged.
  • Stamp duty: A tax payable on commercial property leases with a net present value (NPV) over £150,000. Expect to pay 1% over £150,000 up to £5 million NPV, and 2% for anything above that.
  • Agent fees: Around 99% of leased deals are managed by agents working for the tenant and landlord and both tenant and the landlord will pay a fee to their respective agents.
  • Utilities, fixtures and fittings: An additional cost in simple lease arrangements. Included in serviced and managed tenancies.

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When do I pay rent?

In most cases you’ll be expected to pay your business’ rent and service charge quarterly in advance.

Can I negotiate rental costs?

There is usually some room for manoeuvre, and one common bargaining tool when taking a London property lease is a rent-free period. Seen as a ‘settling in period’, as a very rough guide this might amount to 1 or 2 months’ rent free for every year of the lease up to any break clause. Where repairs or alterations to the premises are required when you agree to the lease, the rent-free period is likely to be towards the upper end of the above estimate. The rent-free period is not guaranteed and is very much subject to local market conditions and the specifics of the property, but it can help significantly in offsetting the other costs of the lease.

To find out more about negotiation rent-free periods, talk to our team of property experts.

How is office size calculated?

One key difference in the UK rental market compared with other countries is that the size of a building is measured by ‘net internal area’ rather than a gross measure. So dimensions of a UK lease property will often appear smaller on paper than its international counterparts because external walls are excluded. In reality, the space may be larger than you imagine.

UK building regulations typically permit 80-100 sq. ft per person within a building.

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Where can I find office space in London?

Hubble searches the whole market in real time, allowing you to browse and compare between all available office space. With up-to-date pricing, live availability, location, amenities, exclusive offers and more, we’ve already helped thousands of companies of all shapes and sizes find the space in London.

Talk to our experts now, or start your search here:

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