by James Nicholson
With costs averaging around 20 per cent of annual overheads, you need to make sure that your office space is working for you. But which is better suited to your business needs – serviced / coworking space or a conventional leased office space of your own? Read our guide outlining the pros and cons of each office set up and make your move!
Serviced/Coworking space – the lowdown
Serviced and coworking providers offer office-as-a-service solutions – ready to go premises. You just turn up, plug in your IT equipment and are fully operational much more quickly and easily than through leasing conventional office space.
Providers are capitalising on growing demand from companies looking for a greater degree of flexibility and the simplicity that office-as-as-service offers.
Contract terms typically range from three months to 2 years but are sometimes even negotiable on a month-on-month basis.
Offices vary between the traditional, serviced office offerings to the more modern coworking set up. The latter have become increasingly popular as there is a growing demand for workspaces that are design-led, inspiring space where staff would choose to come to work; there is a definite movement away from the vanilla white box solutions of yesteryear.
Modern providers will typically offer coffee shop-style break out areas, creative meeting rooms, bicycle storage, showers and modern office design. Another, perhaps obvious attribute of the serviced and coworking models is that many of the hassles of managing an office space are taken care of for you – there’s no need to organise cleaning, recycling, drinks stations – this is all offered as part of the service.
Similarly you don’t need to worry about wads of invoices – as far as possible, everything is wrapped-up in to one all-in cost (N.B. if you have specific needs for faster internet, multiple meeting rooms etc. these often come at additional cost).
“Paying only for what you need, when you need it, is a lifeline for many small businesses who want to put their capital into their business, not real estate.”
Serviced solutions relieve occupiers of the significant capital expenditure associated with setting up conventional leased offices and allows the flexibility to grow or contract your space to suit your requirements – perfect for businesses that are just starting up, growing quickly, working on short term contracts or simply just don’t know what their headcount is going to be over the next 12 months!
Many small businesses also benefit from the collaborative nature of working within shared office space, which facilitates and encourage networking and sharing ideas. Some of the more modern coworking providers pride themselves on their ability to drive benefit for their members through the communities that they build.
These providers will also offer event spaces for businesses to present to prospective customers or investors, or for more experienced entrepreneurs, experts or service providers to offer their help to the community.
Businesses will generally find that costs for serviced or coworking space will be higher per square foot when compared to similar space taken on a conventional lease basis – you are, after all, paying for the convenience, services and flexibility of terms offered. The providers also tend to work their space hard – fitting a larger number of desks into a smaller amount of space.
It’s important to understand exactly what’s included and what’s not; it is not uncommon to hear of occupiers finding that the costs for a dedicated line / faster broadband, additional printing credits and/or extra meeting room hours tend to add up really fast.
The licence agreements will typically allow the operator to move you to a different part of the office to accommodate other new occupiers – this can be a pain if you’ve just got yourself settled in a particular part of the building.
Serviced office space
Good for:
- Young businesses who like the reduced upfront capital expenditure
- Business requiring short term solutions or short term flexibility
- Office-as-a-Service – hassle-free management
- Simple, single cost solutions
Not so good for:
- Creating own identity/branding/culture
- Businesses wanting unusual, bespoke solutions
- Businesses with many visitors
- Those able to commit for longer terms – you are paying unnecessarily for flexibility
Conventional leased space – the lowdown
Leasing conventional office space involves renting directly from a building’s landlord on a price per square foot per annum basis and usually requires a contractual obligation of between three to ten years.
Businesses opting for this type of office space are usually more mature/established businesses who have reached a point where they can take a longer term view on the amount of space they will require.
For businesses that can commit to longer terms, a conventional lease can work really well.
“The space that you rent is entirely yours, which allows you to put your own stamp on premises including branding, use of space and creative fit-out.”
Businesses are given freedom to nurture, evolve and establish company culture and brand presence while focussing on employee productivity and satisfaction.
Leased office space
Good for:
- Larger, more established businesses, with better scope to predict their requirements over the longer term
- Businesses wanting complete control over the brand, design and culture of their workplaces
- Brand Identity
- Control as to how you use and manage your space
- Lower long-term costs and overheads
Not so good for:
- Finalising the deal takes much longer than serviced / coworking
- High capital expenditure for office fit out
- Capital expenditure for reinstatement at lease end
- More management intensive
- Responsibility for office service charges, rates and utilities
- Important to accurately forecast growth as the space is fixed for the duration of the lease and opportunities to expand/contract are typically limited.
- For younger companies, a substantial rent deposit is often required to satisfy the landlord’s perceived risk of you defaulting on paying the rent.
