Opening a London office: The process, the pitfalls

Are you thinking about setting up a London office? If so, you’ll be amongst elite company; the UK’s capital always ranks as one of the world’s top cities and it was recently placed first in Forbes’ 12th annual survey of the ‘Best Countries for Business’. The likes of Amazon, Apple, Google and Spotify have recently acquired London office space, but it’s not just the big conglomerates setting up across the pond – smaller firms make up the bulk of the nearly 9,000 US companies with a London base.

Finding a suitable location is an integral part of setting your London operation up, so allow the time (typically between 3 – 6 months) it takes to search, negotiate and secure an office space. Leasing an office is nothing like renting an apartment.

Whilst understanding the market and investigating the pros and cons of one location over another are important, the fundamental component is navigating the technical and legal aspects of acquiring a lease. A large part of our service is supporting our clients by identifying areas for potential dispute and ensuring favourable negotiations around rent reviews, break clauses, alienation and so on. Getting this consultancy early on will protect your interests and can prevent costly mistakes later.

Demand for office space, despite Brexit, has remained relatively high in London. But a less certain economic outlook is creating openings to strike deals with landlord, such as rent-free periods and more openness to negotiate in our key areas in the contract. This is where you need local expertise and experience on your side to lock-in these opportunities.

Here are some of the things that US organisations need to be aware of when it comes to choosing their new London office:

  1. The cost of your dream site

London is one of the most competitive commercial markets in the world, with a high average cost of office space, whether you’re looking for an exposed-brick start-up paradise, a modern glass cube or a brass-plate townhouse. Most people considering a branch in London will be drawn to the neighbourhoods they’ve heard of (such as Temple for solicitors, the City for finance, Soho for creatives or Shoreditch for tech). Be warned though – popularity means price. It’s also important to consider all the additional costs at an early stage – not just rent but also property tax, service charges and fit out (more on that below). Keeping an open mind can mean that a few streets away from your dream postcode could be the physical space you need at a price you can afford.

  1. Bricks and mortar, not fibre and data

In the digital era, connectivity is everything. However, you mustn’t assume that just because everyone needs it, you’ll necessarily have it included in your lease. Quite often access for a connection must be negotiated as a clear item within the lease, or even as a separate legal document. It might seem unbelievable, but far too many new tenants move in and then wonder why they haven’t got any broadband. The key is to be prepared and know the questions you need to ask the landlord up front so that you fully understand what is covered and what requires additional agreements.

  1. The hidden cost of fit out

You’ve found the office of your dreams – it’s got the location, the floor space and a charming reception, with a price that fits your budget. You just need a few alterations to make it perfect. That’s where you need to look at that price again. Fit out isn’t usually included in the cost of the lease – it’s something you’ll need to pay for separately, and the landlord may have restrictions on what can and can’t be done. Never assume that you’ll be able to make a blank canvas your own – in a city with a huge supply and demand issue, someone willing to settle for less is always just around the corner.

  1. Lost in Legals

London is one of the most secure places to conduct business. But this security comes at a price. There can be as many as 10 separate legal documents you may need to enter into.From Wayleeve agreements to Superior Landlord consent documents and Letters of Opinion, it’s critical that these documents are managed correctly to ensure a smooth transition to your new office.

  1. A lease to suit your business

Things change. Even the most detailed of forecasting is still just forecasting. What happens if you need to expand, or downsize? In these instances, it’s critical to be working with an expert who will guide in negotiating a lease that won’t see you unfairly penalised if your requirements change before the end of the term.

  1. Are you really happy with everything?

Lease negotiations can drag on, with pressure, whether real or imagined, building on both sides. Prospective tenants can feel pushed into leases based on promises to fix so-called smaller issues or elements. However, promises not enshrined within the lease aren’t worth the paper they’re written on, so it’s vital that everything is agreed upfront before the lease is signed. Whilst it may feel that this draws out the process, the alternative, of unfulfilled promises and broken relationships between tenant and landlord, is a much longer-term headache.

Start planning your London office opening with as much detail and consultancy as possible. Acquire the right local knowledge early on to guide you through the pitfalls and processes to increase your chances of securing the right base for the next stage of your business.

 

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