Businesses could save almost £20,000 a year by switching to coworking space

Average office rental costs in the UK are nearing £3,000 per month, as evidence grows that more companies are switching to a coworking model to reduce overheads.

Business comparison website, Bionic analysed the average cost of renting a commercial office across the UK. It found that the average cost of renting an office in the UK is now £2,969 pcm. For firms based in London, the figure rises to a huge £11,936 pcm.

Earlier this year, the government raised business rates. The resulting price increase caused a surge in online searches for ‘coworking space’ as businesses looked for ways to adjust to the rate rise and reduce pressure on balance sheets.

Below, Startups hears from businesses who have moved into shared office space this year about the benefits of a flexible payment model; both financial and functional.

How coworking is catching up with business needs

Before this year, the coworking industry was going through a turbulent period. During COVID, various stop-start lockdowns put the brakes on business activities, with the majority of office employees shifting to at-home working.

That legacy has continued into 2023. Labour market figures show that around 40% of working adults reported working from home at some point in the past seven days.

But in today’s weakened economy, managers are struggling to reconcile the flexible working trend with sky-high business rates.

Coworking is the solution many have turned to,causing the market to undergo a complete 180. According to research by Mintel, the number of serviced offices in the UK is forecast to reach 6,218 in 2027, representing cumulative growth of 52% compared to 2022.

Tobias Batkin is co-founder of Work + Play, a coworking provider based in North London. As a serial entrepreneur, Batkin says he’s seen for himself the limited bang that business owners get for their buck when it comes to office space.

“Industrial units and basements are the reality for most SME owners,” he says. “Typically, coworking spaces operate like real estate firms. But today’s remote workers don’t want full-time or private offices. They don’t even necessarily want to visit the office every day.”

Hybrid coworking or: how to stop spending and love the office

Leaning on copious experience as a business owner, Batkin has shaped Work + Play’s USP to offer small businesses affordable pricing plans that reflect flexible work arrangements. Like many providers, this has involved the introduction of hybrid memberships.

“Business owners who only use our offices twice a week, only pay to use it twice a week,” he states simply.

Prices depend on contract length. For example, based on attendance of ten days in the office, a member would pay £150 + VAT pm on a 12 month contract. At that price, a firm with nine employees would spend £16,200 pa.

Based on the Bionic research, that represents a total saving of just under £20,000 pa for the business, or the annual salary of a full-time employee. That’s not to mention the amount of money saved on energy bills and maintenance fees, which the provider takes care of.

Alongside, the company provides a concierge booking system to give members a real-time view of what the space’s occupancy looks like. They can then book desks in advance to ensure that large teams can work together.

Because of this, what was previously the haunt of microbusinesses and freelancers is now an affordable alternative for small businesses.

“We’ve attracted ten different SMEs at Work + Play,” says Batkin, “some of whom have abandoned their offices altogether in order to embrace the flexible options that we provide.”

Of course, not every industry can afford to move into an office space. Artistic industries, and those with specialist studios as a workspace. Nonetheless, Batkin tells me about one Work + Play member who is a full-time florist.

“She already has a space to put together all of her flowers, but she needs somewhere outside of all of that in order to come and do her admin,” he explains. “Many of our members have never used coworking before and see this as an alternative to working from home.”

Coworking gives small companies access to capital

According to the Bionic research, there is a definite North-South divide when it comes to office rental costs.

While there are still affordable coworking options to be found in cities like Manchester and Birmingham, the most expensive locations for rent contracts were found to be London and the South East.

In London, it is nearly impossible to find cheap coworking space. Firms based in the capital can expect to spend around £143,000 pa on their office rent. In comparison, a company based in Aberdeen will spend, on average, a significantly lower £88 pm.

That statistic makes the kind of hybrid contracts that Work + Play is offering all the more enticing.

Companies which might previously have been unable to afford an office space in the Big Smoke can spend a fraction of the cost to access the UK’s largest business community; positioning themselves for advantageous partnerships and a bigger customer base.

And, because of the prime real estate that London offers, competing providers have given businesses lots of coworking options. In fact, London was voted the best city for coworking in the world earlier this year.

Leila Baetiong is Operations Manager of UP Projects, an arts organisation and coworking user. Baetiong says the UP Projects team currently works two days in Work + Play’s London office, after switching from full-time office use earlier this year.

According to Baetiong, the company used to spend £2,800 pm on a full-time office. Now, the team spends just £1,600 pm.

“We used to have an office Monday to Friday,” she tells Startups, “but due to COVID we moved to a hybrid mode of working. We have continued to work in this way as it provides a more flexible solution for the way we work, for example with childcare needs.”

Employee perks and benefits complete coworking package

Another bonus that coworking spaces bring to business users is improved staff morale. Most providers host social events, such as free yoga classes. These are designed to promote positive company culture, and should be sold as an incentive for new hires.

Such add-ons are becoming increasingly expected by employees, as businesses compete to attract the best talent.

Charlie Cudworth is managing director of FigFlex Offices, a coworking provider. Cudworth says the workforce is increasingly asking for a more accommodating employee experience post-COVID.

“We are seeing demand for FigFlex desks from a much wider range of businesses,” he reports, “with many realising traditional offices with onerous lease agreements are no longer fit for purpose.”

Hybrid coworking also represents an opportunity to promote good teamwork for predominantly remote-based teams. In fact, one survey by DeskLounge found that 37% of businesses which use coworking do so for the collaboration opportunities.

In a shared office, workers from multiple companies can meet and interact with each other for strengthened employee engagement.

As a result, firms that switch to coworking won’t just save money by reducing fees. They’ll save money indirectly via an improved recruitment strategy, and lowered staff attrition rate.

That said, the benefits and perks offered by some coworking providers, such as WeWork’s controversial perk of free beer on tap, can create a distracting environment – something workers aim to avoid by working from the office instead of home.

In Batkin’s opinion, this is too far down the ‘quirky, fun, loungey’ type. “Ultimately, a coworking space still needs to be a space that’s productive,” he says.

Still, it’s clear the shift towards coworking is not just being driven by cheap deals, providers are genuinely answering the changing demands of today’s workforce. The sector’s scale-up – somewhat triggered by the current downturn – is at the beginning of a larger growth journey.

“Coworking will inevitably trickle its way through the economy,” Batkin argues. “Whether that leads to more members or more sites, I think the industry is really in a period of rebirth.”

Read more: where to find cheap coworking space in London as a small business.