The business rates bill for offices in the city (of London) will rise by £1.4bn, or 33% over the next five years. The British chancellor Phillip Hammond has since announced some relief for those hardest hit by rate rises, but many recruitment businesses will not be able to claim any compensation at all.
So, what are the options for recruitment business owners in London?
There are many of us who on the face of it are stuck in a hole – we need to be centrally located because we interview however many candidates and need to be able to visit our clients at the drop of a hat. But, have you thought about the option of reducing your office space and moving your back-office further out where rent and rates are cheaper?
Furthermore, you might even consider buying an office for the admin team, rather than renting and turning a negative into a positive. Clearly this isn’t an option for most in central London, but it just might be further out.
Many recruitment businesses who don’t need to interview a high volume of candidates face to face or can do this via Skype operate from a small office in London and work from home. Clearly, if you fall into this bracket, then serious consideration needs to be given to closing your office and just commuting in. Perhaps you retain the services of a virtual office and have some sort of ‘hot desk’ set-up?
According to two virtual office firms based in central London, many are doing this already. Some are going further and rather than moving into rental space are taking virtual office space to give them the flexibility to upsize and downsize quickly. They are also giving themselves time to see how the rental market rate reacts to the rate increases over time. Indeed, both virtual office firms are at full capacity and have no vacant offices to rent.
For those that cannot or don’t wish to pursue any of the above options and fall outside of the parameters to gain relief, there may be one further option – ‘patience’.
I am not a property expert but logic dictates that if many businesses (remember these rate hikes affect everyone) have to move their operation outside of central London, then rent prices will have to drop.
Perhaps not in the short-term as landlords try their hardest not to drop their rents. They will likely sweeten new deals by offering more flexibility around free rent periods and concessions around fit- outs etc. However, in time, it seems likely that rents will drop as businesses who can operate slightly further out will do so. Locations in central London that might have once been seen as fashionable are now a hive of activity. For instance, many businesses have moved their offices to Farringdon and the north east of Tottenham Court Road is somewhere being talked about as the new place to be and where rental prices are more competitive.
So, if you think you lack options and are going to be stuck with exorbitant office costs going forwards, don’t despair! Review your options carefully and hold a while before signing any deals on a new office or if you need to move now, negotiate hard.
About the author: David Morel is the CEO/Founder of Tiger Recruitment, one of London’s leading secretarial/administrative recruitment agencies. David founded Tiger in 2001 and has written extensively in the press and wider media advising both employers and job seekers on best recruitment practice.