Setting Up Your Business: The Advantages Of Serviced Offices

By Author: Emily Taylor
Total Articles: 16
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The dream of the brass plate on the door may seem like an old cliché to today's entrepreneur, but in fact, it's a tradition that's still alive and well, and plays a key role in fuelling demand from business start-ups for conventional office space.

Hidden costs of traditional office space
Unfortunately, it's also a recurring nightmare for many, as they quickly discover that their conventional offices - on their conventional lease terms - are not only a major constraint to a developing business, through their inflexibility, but are not quite the cost-effective solution that they seemed. The reason? Because the headline rental figure is just that: a figure which omits the host of other business costs associated with leasing a property. In addition to the basic rent, there will be rates and service charges, fitting out costs, energy overheads, office equipment costs, meeting facilities and, of course, administrative support.

Flexible working
For the majority, the decision to take a serviced office suite is most likely to have been driven by the need to remain flexible. To be able to expand or contract ...
... according to the needs of the business, or to be able to opt out altogether after just a few months, are vital for companies of all shapes and sizes - whether a small start-up business or a major, global corporation needing a short-term satellite office to fulfill a one-off contract.
The alternative is the prospect of being tied into a lease, usually for a minimum of five years, on a fixed amount of space, and incurring severe penalties if this arrangement no longer suits.

Add to this the setting up and fitting out periods (and costs), which can take months, and the case for the ‘ready-to-go' office, becomes stronger still. The only real barrier in most people's minds has been the perception that convenience and flexibility like this comes at a cost.

But as office rentals have continued to rise relentlessly throughout the UK - and in London in particular - a clearer picture of the true cost of occupation has begun to emerge.

So, looking at the pure financial case for serviced offices, below is an example of how the cost model works in reality. For the purposes of this exercise, we have used Executive Office Group's Farm Street office building in Mayfair, London W1.

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Real case comparison of serviced v conventional office costs

If you wished to accommodate six people initially, it is likely that you would require a total of around 1300 sq ft of space, allowing for actual offices, a reception, a meeting room, kitchenette, and corridors. Faced with the desire to expand, it is more likely that you would consider taking about 1500 sq ft dependent on what may or may not be available in the market.

Costs: Per sq ft/per annum
Rent: £50.00
Rates: £18.00
Running costs, inc electrics, maintenance, repairs, building insurance, service charge, heating and cooling: £12.00
Costs of fitting out, furnishing, equipping and cabling, approx £70 per sq ft amortised over 5 years: £14.00
Approximate total cost per sq ft: £94.00
1500 sq ft @ £94 sq ft: £141,000.00
Receptionist (gross salary): £22,500.00
Total occupational cost: £163,500.00

Cost of six person office at Farm Street: £78,000.00
Approximate cost saving: £85,500.00

And of course, these figures do not include the time involved in finding, leasing, fitting out and equipping conventional space, or the legal costs and stamp duty incurred when negotiating a lease instead of a simple agreement. Furthermore the contingent liability of leasing space on conventional terms, that may not be suitable for your future needs, has not been taken into account.

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So what about that dream of the brass plate on the door? Well, it is always going to come at a cost: a financial cost - in terms of all those hidden extras - and a business cost, because of the constraints a conventional lease will impose through its inflexibility. The good news, though, is that there is another answer: the prêt a porter serviced office suite, which gives you the flexibility you need - at a highly competitive rate. While brass plates may not be provided for customers, operators such as Executive Offices do not employ any form of company branding either, and so their customers own identities are not subsumed by, for example, the operator's own name behind reception - or indeed on any kind of brass plate.