First, there is no hard and fast rule when it comes to which type of office product – leasehold, managed or serviced – is best for your business.
The quality and variety of office space available in London, across all three types of office, has increased in the last few years so that you might find that there are now leasehold, managed and serviced office options which could all work.
That being said, the length of contract, size of the business, changing personnel needs and working patterns and other factors such as privacy, branding and building amenities, will have a big impact on which type of office product might be best for your businesses’ needs.
0.5 - 3 years: Committing significant resources to an office lease can be daunting. If your business is unable to commit to a lease term of more than 3 years, serviced or managed offices are often the best option. These office products are geared towards flexibility. Whilst the monthly cost might be higher than a leasehold office, the offices can be acquired very quickly and with little or no fitting out costs and no exit costs at the end of the contract – i.e. ‘easy in and easy out’. Making it ideal if your business might need to upsize, downsize or relocate to a new area in the near future.
3 years+: If your business can commit for 3 years or longer, leasehold offices might represent better value. Despite the upfront capital expenditure associated with leasehold offices, such as fitting-out and exit costs, the annual running costs are typically lower than serviced and managed offices, making the overall cost more economical over time
5 – 20: if your business has less than 20 staff, where the receipt of funding or even the addition of a few new staff members can lead to a small office being quickly outgrown, serviced offices are a great option as the short-term contracts allow you to scale up or down in size relatively easily.
20+ (stable): Flexibility can take a back seat when you know your staffing needs will remain consistent over time. With a stable headcount, your business is likely to benefit from better value and return on investment over a term of 3, 5 or 10 years, with a leasehold office. Leasehold offices give you enhanced branding and complete control of the design and fit-out, meaning you can put your stamp on your new office and give your HQ more permanence.
20+ (fluctuating): When you have a larger fluctuating workforce, serviced or managed offices with a 1 to 3 year term can still be the ideal solution. Flexible contracts, lower relocation costs, and expedited relocation times will allow your organisation to adapt to rapid change more easily. Managed offices can often be entire floors affording greater privacy and more options for corporate branding and cultural onboarding.
Office Working/Occupancy Patterns
If your business has a hybrid approach to remote and office working, planning your ongoing space needs presents a challenge. For example, you might have an office occupancy rate of 30% on some days and 80% on others. Serviced offices are well suited to dealing with fluctuations in headcount – often there are large lounge or co-working areas that can absorb additional staff. Some of the larger providers also have large boardrooms, seminar or event spaces that can be hired, preventing the need for these to be included in the office space itself, thus savings costs. Above a certain size, and with clever space planning and a well implemented rota system, it is certainly possible for leasehold and managed office space to also work for companies with a mostly remote workforce.
For some businesses, their brand is ubiquitous and vital in reinforcing the culture for visiting clients and office-based staff. If branding is essential for your business, then managed and leasehold offices will give you a greater degree of control over branding at the entrance to your office floor, within the passenger lift and in the building reception. The branding options within serviced office space are much more restricted, often being limited to a small sign on the exterior of the office unit as the centres own branding takes precedence.
If privacy is essential for your business operation, then managed and leasehold offices will be the most suitable as they offer self-contained floors, which can usually only be entered with key-fob access. Whilst serviced offices do provide designated office space, accessed by key-fob, the office will be on a floor shared with a number of other tenants. Further, the offices are often partitioned with glass to prevent natural light being restricted, which means that other tenants can often look into your office space.
Serviced offices with communal spaces and a culture of open collaboration are fertile ground for breeding communities amongst like-minded tenants. Shared kitchen space, lounge and collaboration areas and regular networking events are designed to facilitate interaction and create new business opportunities. Managed and leasehold offices tend to have less, or no shared community space, and sometimes lack that true sense of community and vibrancy.
Above a certain size range, i.e. floors of 2,500 sq ft and above, most buildings will provide amenities such as a commissionaire, showers and bike storage, and will be available as managed or leasehold products. As buildings get larger, the amenities tend to improve, including additional perks such as outside space and shared communal areas.
For tenants who only require a small office, but who want to benefit from wider amenities, serviced offices can be a good option as they are often part of a much bigger building. Some of the larger serviced office providers, such as WeWork and The Office Group, major on shared space with lounge and collaboration areas, on site baristas, exercise studios and community events.