An expanding company that I will not bother to name recently made great play of its move to new offices in the City of London, posting photos across social media of the team standing on their new balcony, with Tower Bridge and the Tower of London resplendent behind them. The message was clear: We have arrived, we are a firm that deserves to be taken seriously.
But does boasting a fabulous address complete with stunning view really matter at a time when, post-Covid-19, so many people are happy to work from home? (Indeed, many people will now insist on being able to spend at least part of their working week at home). Is there still a premium on prestigious addresses that might, in practice and beyond signalling, do very little for a company’s ability to meet targets, gain traction, or attract the best talent? Are prime offices an expensive folly best left in the past?
Beyond a decent, reliable internet connection and an endless supply of coffee, what, after all, does a company that is not manufacturing physical products actually need? The question is particularly relevant for start-ups, often strapped for cash and operating from staff members’ homes, garages, or maybe a local hub offering subsidised office space. What is to be gained by upping sticks and relocating to a new, shiny Class One office building, all glass and steel but lacking in soul?
Worth the rent?
At first glance, the numbers look generous to anyone hunting for space. London’s overall office vacancy rate climbed to a 20-year high of 10.6 per cent by the end of 2024, a tenant’s market, surely. Except that headline figure conceals a structural split that makes it nearly useless as a guide to anything. Grade A vacancy in the City and West End sat below 0.5 per cent, while Grade A offices accounted for more than 70 per cent of leasing in 2024 despite making up only around a quarter of existing stock. The obsolete space is everywhere; the good stuff is almost gone. In Mayfair and St James’s, headline rents now exceed 150 UK pounds per square foot (or more than 1,500 UK pounds per square metre), with some deals hitting 200 UK pounds per square foot, a record high for London. For a start-up cramming 20 people into 3,000 square feet, that is 600,000 UK pounds a year before a single salary has been paid.
There is, of course, a workaround, and it is cheaper than one might imagine. A virtual office with a registered address in Mayfair, the City, or Canary Wharf can be had for as little as 50 UK pounds a month from a variety of providers. The mail gets forwarded, calls get answered in the company name, and the W1 postcode appears on the website and the business card. Nobody visiting that website needs to know the founding team is working from a kitchen table several miles away. Whether that constitutes impression management or mild deception is largely a matter for the marketing department.
For early-stage companies with no clients to impress in person and no reason to justify the outlay, it’s a deal that’s hard to argue with.
A room of one’s own
Nevertheless, there is a reason companies continue to pay eye-watering sums for real desks in real buildings, and it is not entirely vanity. Talent acquisition is one part of it. Some of the best candidates, given the choice between a shiny Clerkenwell studio and a Zoom link to a faceless entity, will opt for the former, especially if the office is where the interesting people gather.
There is also a subtler argument about culture. Teams that meet in person, particularly early-stage ones, tend to develop a shared shorthand that no amount of Slack channels entirely replicates. The serendipitous conversation in the kitchen, the overheard pitch, the impromptu whiteboard session. These things are harder to schedule into a Google calendar.
The strongest case for the physical office, though, is the one least often made explicitly: network effects. The top three sectors driving office take-up in London remain finance and insurance, professional services, and tech and media (particularly AI, fintech, and creative start-ups). These sectors cluster. A fintech start-up in a shared building in Shoreditch or a managed office floor near Old Street is not simply paying for a desk; it is buying proximity to potential investors, future hires, and the kind of lateral thinking that tends to emerge when smart people from different companies bump into each other by the coffee machine. Coworking spaces and managed offices understand this, which is partly why the flexible office market has expanded sharply even as traditional long-lease demand has softened. Average flexible desk costs run at around 576 UK pounds per person per month in London. Not exactly a bargain, but well short of a full lease on a glass tower.
The trophy office, leased, branded, photographed, is largely a signalling exercise, and signalling is not without value. Investors, clients, and prospective employees all read the environment as part of their due diligence, consciously or not. A start-up that has committed to a proper office in a recognisable address is telling a story about permanence and ambition. Whether that story is worth 600,000 UK pounds a year to tell is a different question entirely.
Hub spot
The smarter founders, for the most part, are not asking whether to have an office. They are asking what kind. The trophy lease is, increasingly, a legacy product designed for a world in which physical presence was the default and the alternative barely existed. The more interesting models are the incubator, the managed floor, the deliberately curated co-working space where a young company can plug into a community as well as a power socket. Spaces of this kind (WeWork’s turbulent history notwithstanding) offer something the virtual address cannot: the sense of being embedded in a place where things are happening, where the people around you might become your next client, your next hire, or, in the best cases, your next investor.
The company on that City balcony may well have made a sensible decision. Premium space in London’s core is genuinely scarce, and there is no shame in wanting to impress. But the photograph on social media of Tower Bridge gleaming and staff grinning also speaks to the enduring human instinct to demonstrate arrival by paying for the view. In a world where the same postcode can be bought for a pittance, that instinct deserves at least a moment of scrutiny before the lease gets signed.
Photo: Dreamstime.
