What type of space do you want/need?
The cost of renting your workplace is likely one of your company’s largest annual expenditures. Also, there’s the hidden costs of not getting it right – are you in the best location for your clients? Does the workplace design support your staff? Finding the right office space to suit your business is daunting, but crucial in remaining competitive in today’s volatile market. So what are the types of space and their benefits?
Coworking spaces offer flexible terms for a number of desks in an open office space and usually include meeting, breakout and dining areas. Where the coworking sector primarily began as a community setting to serve small companies and startups, they now appeal to a much wider spectrum of companies – from multi-million pound corporations to SMEs – providing an excellent source of overflow and flexible, ancillary workplaces.
Coworking spaces can be secured as desks per day, all the way up to yearly membership terms. Shared amenities, work areas, and appliances help keep costs low. Longer commitments often provide lower rent prices, but depending on your situation, it may be worth paying a premium for the flexibility.
+ Sense of community
+ Low monthly cost
– Lack of control over space
– Lack of privacy
Serviced offices provide a space for your company to “plug and play” – fully fitted out and furnished workspaces. These offices offer flexibility via shorter, often rolling contracts that can be agreed and sourced quickly.
The main benefits of this type of office are the all-inclusive monthly costs, flexibility, and lower set-up costs (in comparison to leased offices). A major drawback is the lack of control over the environment – from spatial design to branding. If your company is expecting a high number of client visits, this shortcoming can prove to be substantial. Serviced offices generally comprise of private offices, fixed desks, hot desks and coworking space.
+ Minimal overheads
+ Flexible work model
– Limited control over design
– Can prove expensive over time
Lease / Pre-made
As a hybrid between serviced and leased property, this type of property provides a ‘ready-made’ template where branding and decor can be adjusted to your requirements. The premises are usually acquired and operated by third-party on your behalf over a two to three-year lease.
The aim of this category is to balance the ‘plug and play’ flexibility of a serviced office and the security and control of a leased option without the upfront fit-out expenditure and end-of-lease costs. Incidentally, this is both its benefit and drawback. If you require tailored amendments, these types of property can mean you have to force your company to fit to the pre-made design, rather than the template fitting to you. Furthermore, if your company is in the space for 2-3 years, this reduces the flexibility of the space.
+ Reduced time and cost on design, construction and dilapidations
+ Maintenance and responsibility of space with third-party
– Limited control over branding and design
– Can prove expensive over time
Lease / New space
Often known by property agents as ‘traditional leasing,’ this type of tenancy is often the most lengthy to get right, but once the project is completed; it’s a tailor-made workplace fitting to your company’s form and function – hence it’s popularity. On selecting your space, the interiors are usually a ‘clean-slate’ (see our article on ‘Types of Fit Out’ for more on this)
Typical office space are leased at a cost per square foot of area on an annual basis. You’ll also be responsible for the associated rates and service charges. Usually, the interiors are left as a ‘clean slate’ and can be redesigned and renovated in their entirety. As the occupant, you’re expected to manage and maintain all aspects relating to the space, including furniture installation, fit-out, cleaning and setting up your IT and telephone network.
+ Tailor-made office to your requirements
+ Freedom to adapt space over lease
– Initial costs can prove expensive
– You own responsibility for maintenance
How much does leased office space cost?
There are four main costs associated with leasing office space:
- Design and fit out
- Business rates (council tax for commercial property)
- Service charge
Each of these costs will reflect approximately 70-90% of the total cost on an office.
The cost of your office rent is determined by the size of the space requirement (usually in sq ft/sq m), location, as well as lease length and terms.
These fundamentals are worth bearing in mind:
- The larger the rented space, the higher the cost
- The more flexible the terms, the higher the cost
- The higher the demand for the location, the higher the cost
- The longer the lease, the larger the discount and rent-free period
For more on budgeting, check out our in-depth article on “How much will an office fit-out cost in 2020”)
What is the minimum term for a commercial office lease?
While there is no set minimum length for a commercial lease, most landlords expect a lease for three to eight years with the current average sitting at 6.3 years. As suggested, you receive better terms and rates for longer leases.
What office space is right for you?
There is no definitive answer as to which you should choose as it depends on your needs, timelines and budget. Many companies make use of more than one of these options as they grow. More recently, companies are taking office leases and using coworking as an additional, ancillary space – providing freedom to work when they want and as an escape from the office.
If you’re still not sure which is the right choice for you and your business, consider the following questions:
- How much space do you require?
- What’s in your budget now and the next 5 years?
- How long do you need the space for?
- Who is using the space and how often?
- What kind of brand do you want to portray?
- What kind of amenities do you need?