Flexible Offices or Traditional Lease: What is right for my business?

FLEXIBLE OFFICES VS TRADITIONAL LEASES

Firstly, when comparing the cost of each option, you need to make sure you are comparing ‘apples with apples’. Traditional leases are “exclusive of all costs”, meaning you will be required to arrange and pay all your necessary services separately, including rates, service charges, utilities, insurance and the cost of any repairs required throughout the term of your lease. With flexible offices, the vast majority of the services you need to run your business are all included in your monthly licence fee.  Therefore, in order to compare ‘apples with apples’, you need to add all these typical costs on top of the rent you would be paying under the terms of the traditional lease.

FLEXIBILITY FLEXIBILITY FLEXIBILITY

Traditional leases are inherently inflexible; you are contractually bound for the entire term of your lease, which at present in Belfast means a minimum of 5 or 10 years. If a company opts for a flexible workspace solution such as coworking or serviced offices, contracts are typically for a period of between 1 month (rolling) and 3 years with most parties opting for an initial 1-year contract to start which can be renewed thereafter.

FOR A LOT OF COMPANIES…

Looking forward and predicting (with any degree of certainty) what your business will look like in a number of years, never mind in 10 years’ time, is no mean feat. The new norm of businesses is operating in an environment where there is a distinct lack of predictability and this means that for many businesses flexibility makes a lot of sense. This is equally true for companies who are expecting to grow quickly or in irregular patterns. Flexible offices give you the option to be able to grow into larger and larger space within the building without penalty, meaning they can minimise the amount of space they need to occupy from day one, which in turn transpires into cost savings for your business; you are only paying for the space you need at any particular time.

DESIGNED WITH GROWTH IN MIND

If you opt for a traditional lease and hoped to grow from 5 staff to 50 staff in the next 5 years, you would need to commit to space for those 50 people now. However, with a flexible workspace solution, you could opt for an office for up to 5 people and agree on a particular growth plan with Urban HQ to incrementally increase your office size as you expand, thereby decreasing your monthly start-up costs significantly when compared to that of a traditional lease.

TIME IS MONEY

With Urban HQ you can sign up today and move in tomorrow (unless we are full…). We will complete your office set up, to include: making sure your IT set up is correct, your telecoms are ready to go, all furniture and desking is in place, right through to having great coffee at the ready.

Compare this to a traditional lease where in the initial stages you typically engage a commercial agent to represent you, to physically search & view office space, negotiate & agree your preferred space. Even once you find the right space, you will complete a building survey, proceed through the legal process, arrange for fit out/ refurbishment works to take place (at a minimum carpeting, painting & upgrade of IT cabling), source and purchase office furniture, purchase telephone systems, agree a broadband installation, negotiate your IT security and maintenance the list goes on….

A CONVENTIONAL LEASE… THE HIDDEN COSTS

Under a traditional lease you as the tenant will be required to arrange for and pay for all outgoings; including building insurance, business rates, security costs, light, heat, service charge, broadband, IT management, etc. In addition to simply paying for these items, you also have to factor in the cost to a company of having to manage all these services, manage the suppliers and ensure continuity of service. For many companies, this results in an unwanted distraction for management.

FINDING THE RIGHT SPACE

If looking for space under a traditional lease you should realistically budget 6 – 12 months: 8-12 weeks to view properties, 4 weeks of negotiations, 8-12 weeks in legals and then once closed typically 8-12 weeks to appoint a contractor and finalise the fit out. These timings are with a fair wind and everything going to plan, however, with the supply of top quality office space being undersupplied in Belfast, tenants can find themselves in a competitive situation and find landlords being choosy with regards to a company’s covenant.

COST OF LEAVING

Tenants under traditional leases don’t carry out the improvement works at the end of the lease term but instead will have to negotiate a dilapidations liability directly with the Landlord.   Typically, the landlord will appoint an engineer or surveyor to carry out a report and to price the cost of the dilapidations, a final figure will be negotiated and the tenant will be liable to pay this figure upon termination of the lease or shortly thereafter. Typically, this can cost £50 – £150 per sq m exclusive of the tenant’s professional fees which will also be required to be paid. So, on a 1,000 sq m office, this could cost up to £150,000. Not actually the nicest taste to be left with on your way out!

THEREFORE

If you are in the minority of businesses and have visibility and certainty around your future business needs, then traditional space might make sense for you. However, if like a lot of businesses and startups you don’t know what next year looks like, never mind 10 years’ time, then flexible office space is likely to be a better fit for your business, allowing your company to stay lean, predict monthly outgoings and stay flexible.

For more information about the range of flexible workspace options available at UrbanHQ and how they can be tailored to suit your business needs, contact: space@urban-hq.co.uk