The recent article by Instant Offices suggests that leasing serviced offices could save firms £4,000 per year per employee compared to stand-alone premises on a typical business tenancy. Is this true?
Taking smaller office suites on flexible licences does provide certainty on cost for an occupier and avoids them having to commit to a lengthy lease term.
Over many years Andrew Idle Associates have often advised clients to split up relatively large office buildings in secondary locations, such as Bradford, into small suites for letting purposes on all-inclusive terms; and in so doing this has resulted in a steady demand for such accommodation. It can also mean that it is feasible to split up the space into small enough units that tenants gain full Small Business Relief on rates, and Landlords pay no rates when the suites become vacant.
One down-side is that Landlords are then more involved with managing the building, but a Managing Agent can, of course, be appointed to take away much of that headache.
But coming back to the point, how true is it that flexible serviced offices are cheaper than traditional office premises? Serviced offices can work well where tenant firms are in a state of flux, with fluid space requirements. However, once the floor space increases too much over 1,000 sq. ft. they can, in the opinion of Andrew Idle Associates, prove expensive compared to conventional leases.
When considering conventional leases, firms should check service charge provisions carefully; as well as any rent review clauses and any potential liability under dilapidations at the end of the lease term. In some cases, service charges can be very high, especially where buildings are relatively old and require intensive maintenance; or where there are significant plant and machinery to maintain. Whilst many conventional leases now contain break clauses, it is crucial for a tenant to check what strings are attached to exercising such breaks.