In Part One of this blog post, I said that – 9 times out 10 – I can immediately establish whether a new client should be opting for a serviced office or a conventional lease. Listening to their answers to the following 6 questions is very revealing:
- Are you a start up business?
- Are you planning to expand in the near future?
- How many people do you employ?
- What length of lease term are you seeking?
- How quickly do you need to move in?
- What is your budget?
1. Are you a start up business?
The economic uncertainty of the last 6 or 7 years brought a sharp increase in the number of small start-up businesses – spurred on by redundancies and opportunity. The misconceptions I spoke about in Part One encourage some start ups to rule out serviced office space and pursue conventional exclusively. I think this is a mistake, for a number of reasons:
- Startups are usually small operations. Conventional office space is in short supply generally, but for under 1000ft2 it can be very hard to source.
- Start-up businesses are more risky. Unfortunately many fail. The short term flexibility of serviced space mitigates the risk of failure and a 5 year conventional lease term can add to the burden.
- Many start-ups plan for staggered growth in staff numbers within the first 12–24 months. And successful dynamic start-ups will need to revise their office needs every few months. Serviced space provides the flexibility for expansion as and when they need it – only paying for the space that is required at the appropriate time. On the other hand, committing to a 5 year conventional lease does not provide this flexibility.
- Conventional leases can be complex and time consuming to negotiate – and require professional legal advice, which is expensive. Time and money are critical for all businesses, but all the more so for the start up. A serviced office licence will often fit on a single sheet of A4!
- Finally, running a start up is challenging enough without having to organise furniture, phones, Internet connectivity and other services. Serviced office space makes this quick and easy to set up as it’s included in the rent, which simplifies book keeping; It also provides one point of contact should companies run into any service difficulty.
For the above reasons – 9 times out of 10 – I recommend that start-up businesses seriously consider the serviced office route for speed, convenience, flexibility and cost-effectiveness.
2. Are you planning to expand in the near future?
I’ve covered this above for start-ups, so this should now be self-explanatory. Even if you are an established business, if you are planning rapid, yet staggered growth, then a flexible period in serviced offices may make sense. Why pay for space you are not using – or risk running out of space with years to run on a lease?
3. How many people do you employ?
Again touched on above when discussing start ups: if you employ less than 15 people, it can be challenging to find decent conventional office space in London that suits your needs.
It’s worth mentioning that there is smaller, flexible conventional space available on a sub-let basis. However again this tends to be in short supply in Central London.
4. What length lease term are you seeking?
If you are able to make a 5 year commitment, then you are likely to be in the conventional office bracket. However – in today’s unpredictable climate – many businesses aren’t willing or able to commit long term and require flexibility to quickly adjust to changing circumstances.
If you are seeking an agreement for less than a 3 year period, you will struggle to find suitable conventional office space offering flexible terms.
However serviced office space is set up to allow short term flexibility.
5. How quickly do you need to move into your new office?
Is timing is a big issue? How long does your current lease or licence have to run and when do you have to vacate your current premises? Generally speaking it takes in excess of 8–12 weeks to acquire a conventional lease, from beginning to end. If your current agreement has less than 3 months left with no possibility to extend, then you will have a rather nervy race against time to complete in time.
This is perhaps the biggest reason why many businesses turn to serviced offices, a deal which can be completed in a matter of days on flexible terms that will fit around your needs.
Sometimes I come across tenants who need to vacate existing conventional space in a hurry and don’t have time to search, negotiate and acquire new conventional space. In these cases, we often move them into serviced offices on a temporary basis – anywhere between 3 to 12 months. Once they are settled and the immediate stress has been removed, Find a London Office’s specialists will then begin a search for long term office space with a conventional lease.
6. What is your budget?
Finally, but perhaps most importantly, is the issue of budget. This is where many misconceptions about serviced offices begin.
Side by side, priced per square foot, conventional office space are more cost effective than serviced offices. However, there are many hidden costs associated with a conventional offices – aside from the costs of telecoms, furnishing and fit out, the tenant also takes full responsibility for everything within the space. You will also pay fees for a solicitor and a commercial agent.
A serviced office will certainly appear more expensive simply because it is priced per desk per month, rather than per square foot. However, it’s important to remember that this price is fully inclusive of most costs associated with the office. And aside from a deposit, there are no upfront fees.
Please download our Serviced Office versus Conventional Lease Cost Report to understand properly how this works.
The Ultimate Checklist
In Part 3 of this blog post, I’ll be publishing the definitive checklist to help you decide between a serviced office and a conventional lease in an instant.
Any questions, please post a comment below…