Getting the right office space for your business
Assuming you have decided you need physical space, what are the options and how do you secure the best space for your business? We are going to compare other arrangements (like leasehold) with serviced, look at some of the factors that will influence your decision, how to find what space is available and how to get the best deal.
Office space options
Renting spare space from another business or joining with another business to share a larger office space is a viable option and currently very popular. It suits small businesses and can be very cheap, as many businesses have spare capacity and a bit of extra rent can make the difference between them staying in the space or not.
Downsides are insecurity – circumstances of head lessee can change and leave you without space at short notice – and lack of flexibility – you may not be able to grow or change the space to suit you. Also, as the name suggests, you may not have your own private space, which may be a problem.
A lease is a long term, fixed contract that offers security of tenure. It is a credible option, with long term stability if you do not expect your circumstances to change. In the recent economic climate, lease lengths have reduced considerably as have incentives like rent-free periods, making them a much more attractive proposition.
Nevertheless, whatever the period, you are committed: there may be a break clause, but it will incur financial penalties if exercised. The deposit and rent is payable up front – as with serviced – but is paid quarterly, so the figures are higher.
Additionally, you will pay for rates, utilities, fit-out, legal fees, surveyor fees, insurance, service charge, IT infrastructure, upward only rent reviews along with dilapidations (repair and restoration) on exit.
Things to think about are what restrictions are on the space (can you make changes to suit you (especially difficult in a listed building), what are the break clause penalties and can you re-assign the lease.
This is the most expensive option short-term, but cheaper long-term, and you own the asset once the mortgage is paid. You have complete control, a long-term investment (in theory at least), and the option to become a landlord if you do not need some or any of the space.
Bear in mind though that this is a long term commitment. It ties up cash and market fluctuations can add to costs or decrease value, affecting your ability to sell on. Additionally, all costs, including maintenance, repairs and any problems, are yours.
Well, the service model is what we are talking about here, so suffice to say that serviced offices offer a very flexible, adaptable and controllable option with no unwieldy up-front or exit costs. You also benefit from a lot of onsite, centralised services which, with lease or purchase, would be your sole responsibility.
It would be disingenuous of me not to acknowledge a few downsides to serviced space. Although business centres are not branded, the spaces are still homogenous in many respects and – in some circles – do not have the same status as leased or purchased space and many business owners will undoubtedly see ‘serviced’ as a stepping stone.
And it has to be said that serviced offices may not be economical beyond 20+ workstations and at this point, any business still growing would need to review their situation carefully. This is not strictly a negative, simply a part of the business journey, but does need thought.