What is Right for your Business – Conventional Office or Serviced Office?

Posted on 13 February, 2012 by MOVEHUT

Signing an office contract can be an overwhelming process, especially for start-ups. It is a long-term commitment that needs careful consideration. Finding the appropriate office space that meets all your needs can be challenging at times under a conventional lease agreement.

However, a conventional office lease isn’t the only option when pursuing a new business; a service office is an alternative many commercial property businesses seek when looking for greater flexibility and added peace of mind.

Serviced offices are now the fastest growing sector of the European and global property market today. The rate of growth of the Serviced Office industry has been nothing less than explosive over the past few years, as they offer so much flexibility for new and old, small and large, commercial property companies alike.

One of the main differences between a leased office and a flexible serviced office is the rent that you pay. Serviced offices are more cost effective because the rent you pay includes almost all the costs that you would typically pay on top of rent in a conventional office.

This means the business rate services charges, heating/air conditioning, lighting and power, I.T and cleaning, security, elevators, building & plant maintenance and insurance you pay for in a leased commercial office is all included in the rent for serviced offices. The only additional costs, on top of rent, are for internet/telephone usage (which are normally charged at standard or even discounted rates) and meeting rooms if you use them. A number of operators now offer unlimited telephone calls and internet usage within the rent. It is also worth remembering that serviced offices are fully furnished and ‘ready to move into’ offices-complete with the latest workstations, filing systems, chairs, reception services and tables for meeting rooms, while leased offices are not.

This is positive for your business as this means you can spend more time conducting business as the facilities are already in place, with the capability to tailor the office to meet your business needs at short notice. There is no capital outlay on your behalf and your business can have everything it requires in place by the time you move in and most importantly, your business is up and running in its new premises straight away.

In addition to this, many business centres are already located in prime commercial space. Serviced offices are available in a vast spectrum of buildings catering to all budgets and location requirements. The possibility of sharing office space can drastically reduce the cost of leasing space-which means businesses can enjoy a prime location without it taking up their entire budget. For many SMEs it is not viable to set this up on their own, however in a service office the costs are often shared and therefore much more accessible. Serviced offices consist of full office management and the cost of building repairs are split between all the tenants in the complex. However this is not the case in leased properties, where the leaseholder is expected to fund the running, repair and maintenance of the building, which consequently can be very costly.

With serviced offices there are fewer staff training costs, some providers will ensure all senior staff are fully trained and accredited by the ICS, ensuring their service meets professional standards.

A major difference between traditional offices and serviced offices is the length of the lease. A serviced office lease may be for as little as a few weeks, more typically 6, 9 or 12 months. Whilst in more traditional commercial rental agreements tenants are required to sign a lease valid for at least five years. This can be a risky financial decision for many businesses still in their start-up phase, as leased offices offer no flexibility to increase or reduce space, whereas serviced offices allow businesses to expand or use less office space at short notice depending on the business’ changing needs.

Owners of leased offices usually demand a number of references and personal guarantees from company directors; however these can sometimes be difficult to obtain for new businesses trying to establish themselves. On the other hand serviced offices do not require personal guarantees and only two references are needed to rent office space.

Small office space in leasehold premises is not always readily available, particularly in large cities such as Manchester, Birmingham and London. However this is not a problem with serviced offices as small suites are usually available immediately with larger companies.

Another important difference is that most leases have many agreements and clauses that severely restrict the leaseholder; however the contracts for serviced offices are a lot more flexible with no premiums or covenants.

There is an enormous variety and volume of office solutions now available to suit all budgets and needs. Serviced offices can offer the flexible option to meet the needs of your business. It allows your lease agreement to adapt as the business dictates and can often be a more cost-effective measure, with services and facilities inclusive in the one price.

Finally above all the most important first step to success is to research. Ask yourself what are your priorities with respect to location, budget, branding of the company and number of staff? The answers will be different for every company. Find the right solution and your business will succeed.

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