By Daniel Hunter

London's thriving and vibrant start-up scene is driving a huge demand for serviced office space, according to office space search engine, Office Genie.

The study shows that searches for desk space in the capital are up more than a third (36%) last year compared to 2013.

But Office Genie figures reveal that London start-ups and SME (small and medium-sized enterprise) owners are paying the price to be based in the capital, with the average cost of desk space 129% the UK average. Businesses are currently paying an average monthly cost of £512 per desk for serviced office space in London, compared to the UK average of £224.

Office Geni said there is a danger that businesses will struggle to find suitable office space in the capital. And many businesses are looking outside traditional areas to find better value office space.

For example, Soho has always been a popular location for start-ups and SMEs, but searches were only up 14% last year compared to 2013, with many serviced offices at near 100% capacity. Businesses have looked instead at areas such as Victoria and Kings Cross, which have seen a significant amount of regeneration. As a result, searches for serviced office space in Victoria were up 106% and in the Kings Cross area up 60%.

Similarly, the EC postcode has been the birthing place of the London tech start-up scene. Tech City, also known as Silicon Roundabout, began as a government initiative to encourage tech SMEs and is now home to thousands. But searches for serviced office space in Old Street and Shoreditch were only up 19% and 22% respectively last year, which can be put down to a lack of supply.

Instead, businesses have looked at other locations such as Clerkenwell, where searches were up 47% last year, and Liverpool Street, which as a City location appeals to the growing number of Fintech start-ups. Demand for serviced office space in Liverpool Street doubled in 2014 vs 2013.

When it comes to serviced office prices, there is a huge difference in the cost of desk space across London, with a mammoth 180% difference between the most and least expensive areas for average monthly desk space costs.

Knightsbridge and Notting Hill are currently the most expensive areas (£654 per month) to base a business in the capital, while Brixton, at £233 per month per desk space, is the cheapest. Soho, popular with media businesses, remains an expensive area, with the average cost of desk space around £586. However, Holborn, which is only a ten minute walk away from the outskirts of Soho, is almost 10% cheaper on average.

Looking at postcode district, north London offers the best value when it comes to serviced office space, with average monthly desk costs of £406, just over 19% cheaper than the average. This compares to West London, where serviced office costs are on average £589 per month per desk — that’s 45% more expensive than north London.

Peter Ames, head of strategy at Office Genie, said: “The London start-up scene is booming and it seems every week a new tech or Fintech company launches in the capital. For many business owners, London really does seem to be the only place to be, but that is putting a huge strain on the serviced office space market, with many areas seeing demand significantly outstripping supply.

“The worry is that the capital is struggling to cope with the demand for space, and inflated prices could leave many SME owners with little option than to base themselves outside central London. With cities like Manchester, Bristol and Birmingham thriving as alternative business hubs, and being able to offer much cheaper office space, it’s important that the London start-ups and small business community is catered for, or we could start to see a mass exodus of talent from the capital.

“For start-ups looking for cheaper desk space, sharing an office could be a cost effective and flexible option. In London, the average shared office desk costs around £432, which is 16% cheaper than renting a serviced office space. So sharing could be the most compelling answer for what is a race for space in a competitive market.”