Comparing Conventional Office Leases and Serviced Offices
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Presentation on difference between conventional traditional leases versus taking serviced office space
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Comparing Conventional Office Leases and Serviced Offices
- 2. Options • Freehold workspace • Conventional leased premises • Serviced office space tenir.co.uk
- 3. Freehold Workspace +ve • No landlord • Security / stability • Benefit in any uplift in market value -ve • Considerable capital expenditure • Limited flexibility tenir.co.uk
- 4. Conventional Leased Premises +ve • Security / stability -ve • Limited flexibility • Extra costs – rates, insurance, service charge, repairs, fit out, utilities, legal costs, surveyor’s fees • Extra staff? tenir.co.uk
- 5. Serviced Office Space +ve • “Quick” 6mth licence agreement (no solicitor?) • Move in and operate quickly • No concerns about repairs, IT, rates etc -ve • More expensive per sqft • Limited branding on the property tenir.co.uk
- 6. In summary • What is your requirement? • What is your budget? • What is your business plan for the next 3, 5 10 years? Call if you need advice on finding leased premises. 01732 834 414 tenir.co.uk
Editor's Notes
- Standard leases (or conventional leases) versus the serviced offices which are growing in numbers.
- I’ll throw in for free the freehold option as well……
- Freehold property – much like buying a house – is something you own outright (subject to a mortgage). This isn’t usually an option to many because of the considerable capital expenditure needed including 25% of the property’s value to obtaining funding from a lender. Just like owning a house you are responsible for all costs: Repairs including structure and externals Insurance Security Rates Should you need more space you could be stuck Should you need less space you would have to find another occupier to share with and pay for all the costs until you find this tenant. On the flip side you don’t have to liase with a landlord and it gives you security and stability.
- Conventional Leases Premises are like renting a house but with some differences….. Most offices / shops / industrial units are leased in this country. Traditionally leases were for 25 years but this is usually 5 – 10 years depending on the market and what tenants are seeking. It is highly recommended to seek solicitor’s advice to review or draft a lease. On average it takes 6-9 months from finding premises to moving in – finding premises, agreeing terms, agreeing the lease, fitting out the premises…. You take a fixed area (known as demise) which does not allow you to expand or contract with your business needs. Should you have surplus space, like a freehold property, you will need to find someone to share with. If the premises become too small you either need another premises close by or need to move. This may not coincide with your lease expiry so then you have to look at the options…… Your space needs to include your own reception, meetings rooms, kitchen. Toilets in a multi-occupied property can be shared with other tenants. You may then need your own receptionist. You will need to manage your offices so if there is disrepair you need to find someone to undertake repairs, someone to repair broken lights, decorate, fix the IT problem, sort the broadband connection and telephone lines. You may want to install your own alarm which you will need to then manage. There is the additional cost for fitout and furniture provisions.
- Serviced Office Space agreements are usually in a standard format so you may not need to incur solcitor’s fees or surveyor’s fees. You can usually move in immediately and everything is there for you – furniture, telecoms. There is probably a receptionist provided by the centre to answer the phone initially and direct your post to you. They have their own team to undertake repairs, change lightbulbs, clean the offices, deep-clean the carpets. Security is provided. You can acquire and let go of space as and when you need it (assuming there is empty space in the property!) At the end of the agreement you just move out and hand the keys back rather than enter into lengthy negotiations as to the state of the property and whether further works are required. All sounds perfect – yes – it comes at a cost which makes it more expensive than the conventional leased premises. Traditionally it is also for smaller space but not exclusively. There is also limited branding until your clients walk through to your space. It is likely to be very apparent you are in a serviced office and what impression does that give your clients when they come to your offices? Does it say Start-up?
- In summary review your requirements and what level of involvement and flexibility you want in your property. What is your budget and what is your business plan over the next 3, 5 and 10 years?