Renting office space: what are the options?

Whether you’re setting up your first office or looking to expand, there are loads of office space options for you to consider and it may seem a little daunting making the right choice for your business. In this guide, we look at the pros and cons of each office space option, starting with the most expensive: the traditional commercial property let and managed office space. We then look at the option in between: serviced office space, which is an increasingly popular choice for businesses of all sizes. We finish up with the cheapest options: shared offices, hot desking and the virtual office.

Traditional commercial property let

With a traditional commercial property, your business will let the whole or part of a building exclusively for an agreed period – usually 3-5 years – under a lease. You’ll have to pay legal fees up front, which are typically £1.5 – £3k for a standard commercial lease. You’ll usually be responsible for decorating and fitting out the building, including making any telephony and data installations, and then decorating it again and putting right anything you’ve removed before you leave. You’ll also have to pay business rates and utilities, and take care of repairs and replace anything that wears out. Traditional commercial property is expensive and unsurprising, its popularity of traditional commercial property is declining, but there are still a good number of benefits to consider.

Pros of the traditional commercial property let:

Branding: Since the office is yours for at least 3-5 years (and sometimes longer), you can extend your personal brand and style into your office space.
Visibility: Your business can be more visible than for serviced or shared offices – a street sign, door sign or entry in the lobby directory are all usually possible (depending on the type of building – although serviced offices usually also permit an entry in the lobby directory).
Security of tenure: You have the security that you have a stable base for the duration of your lease.

Cons of the traditional commercial property let:

Legal fees: You’ll be responsible for your own legal fees and almost certainly the Landlord’s legal fees too. Typically each solicitor will charge £1.5 – £3k to deal with a new lease.
Waiting time: The lease usually takes some time to negotiate – perhaps 4-6 weeks – and you’ll then have waiting time to get your office kit out, although some landlords will let you in on a licence agreement before then to do any necessary work.
More space: You’ll need to pay for more space than with other office space types, such as for a reception, waiting area, lunch/break room, server room, store room and meeting rooms.
IT/telephony installations: You’ll need to pay up front for installation of telecoms equipment and IT infrastructure, as well as the related ongoing maintenance costs.
Utilities/business rates: You will have to pay ongoing utility bills, broadband fees and business rates on top of your monthly, quarterly or annual rent.
Rent review: Traditional office lets may be subject to a rent review part way through the term.
Kitting out and dilapidation: You’ll have to pay for furniture, decoration and refreshment facilities and if the landlord provides some of these, they will need to be replaced when they wear out. If you’re moving in your own furniture, you’ll need to factor in moving costs. You’ll normally have to redecorate in the last year of your lease and make good any damage to the property (for example, from removing installations) before you go.
Cleaning/reception: You have to pay for your own cleaning and to hire a receptionist if you need one, providing a suitable area for them to work from.
Maintenance: If anything breaks down, you’ll have to arrange for it to be repaired (or replaced) at your expense.
Tie-in: You’ll usually be tied in for 3-5 years although some landlords permit a break clause after 12-18 months, at a premium.
Service charges: If you are in a shared building, you will usually have to pay a service charge. These may vary and can include significant expenditure, for example for redecorating or repairing common areas.
Moving costs: If you find that you need to move or break the lease, things get expensive. You may need to pay your way out, and since the landlord has guaranteed rent for the term, they are unlikely to give much. You’ll also need to pay all the up front costs again at your new premises, such as installation of IT and telecoms systems.

Managed office space

Managed office space A managed office is a hybrid between a traditional commercial property let and a serviced office. With managed offices, we locate, negotiate, lease and kit out the office for you, and then continue to manage it for the duration of your occupation. There are numerous benefits to you, including that you don’t need any capital upfront (such as for a rent deposit or equipment) and you’re not tied in long term. You also benefit from a fixed inclusive fee that covers business rates, utilities and everything else, and the day-to-day running of the office, such as securing repairs and even safety audits, is taken care of.

Pros of managed office space:

No capital outlay: Unlike a traditional commercial property let, there are no upfront capital requirements (such as a large rent deposit).
Less tie in: Unlike a traditional commercial property, there are no long term commitments.
Branding: Although managed offices don’t usually require a long term commitment, there is usually more opportunity to brand the space than e.g. a serviced or shared office.
No hassle: Unlike traditional property lets, we act as your single outsourced partner to search, negotiate, lease and tailor fit your office, quickly and cost-effectively. Your IT infrastructure, data infrastructure and even your health and safety audits are dealt with by us.
One fixed fee: We manage security, business rates, service charges, utilities, dilapidations and reinstatement. You pay just one fee which is fixed for the duration of your occupation.
No day-to-day running: We deal with all property management including repairs and maintenance.
No legal fees: Managed office space is usually let under licence, a much simpler agreement than a lease – so you won’t need to pay any landlord’s legal fees and you probably won’t need legal advice for yourself either.

Cons of managed office space:

Expense: As you might expect, a managed office is usually more expensive than a traditional commercial property let as services are provided – although you won’t need up front capital.
Waiting time: Like a traditional office let, a managed office takes time to negotiate and you might be looking at 4-6 weeks before you can move in.

Serviced office space

Serviced office space A serviced office is a fully fit out and fully managed office space. You will usually share the building with other companies, but will have rooms or a suite of your own. You’ll benefit from a manned reception, daily office cleaning and day-to-day office management for a fixed monthly fee. Serviced offices are surprisingly competitive in comparison to other options, and are becoming the most popular choice for office space.

Pros of serviced office space:

No waiting time: You can move into your new serviced office space the day you sign your licence.
One fixed fee: Business rates, utilities, cleaning and on-site maintenance are all included, and there is usually a manned reception too that will take your calls.
Kitted out: Your office is fully kitted out with telecoms and data connectivity as well as furniture and decor. You’ll also usually find common business equipment such as copiers and printers available on-site. All of this is maintained and replaced when required, as part of the service. There’s no capital outlay – everything is set up for you.
Visibility: You’ll usually be offered an entry in the business directory in reception, for visibility.
No legal fees: Serviced office space is usually let under a simple licence, so you don’t need to worry about legal fees.
Facilities: Meeting rooms and conferencing are usually available for a small extra fee.
Flexibility: There’s no long-term tie-in and if you need to expand, move or decrease your office, this is usually possible without any additional charges.

Cons of serviced office space:

No branding: You may be limited on the extent that you can extend your business brand/style into your office space – this will vary from centre to centre.

Shared office space

A shared office space is a little like hot desking (below) except usually you’ll have dedicated desks that you always use, rather than just grabbing any desk that’s available when you go in. You might find yourself in a room with several other companies.

Pros of shared office space:

All inclusive: Your single fee includes utilities, rates and all other charges.
Fully equipped: The business centre has a full voice and data installation, furniture, decor and usually facilities such as printing and faxing available. You’ll also be able to hire meeting rooms if you need them, and make use of the lounge/restaurant facilities.
Networking: The centres are often considered to provide a very social portal for working and are operated by experienced property owners.
Flexibility: No lengthy contracts are required.
No capital: There’s no capital outlay – everything is set up for you ready.
No waiting: Move in the day you sign your licence.

Cons of shared office space:

Branding: You’re very unlikely to be able to extend your business brand/style into your office space.
Noise: You can’t be sure who you’ll be sharing a room with and it can be very noisy and distracting.

Hot desking

Hot desking means that you don’t have a dedicated desk of your own but instead, you simply rent one when you need one at a business centre of your choice. The fee is usually very cheap and you can often get deals allowing you to hot desk for a number of days a month, sometimes at a chain of centres, for a reduced rate. With hot desking, you never have any dedicated space for your business, so it’s more a matter of using the service when you need to work, rather than setting up a business presence.

Pros of hot desking:

Networking: Hot desking brings lots of networking opportunities – chances are you’ll meet someone different every time you visit the office.
Facilities: Hot desking gives you everything you need, but only when you need it – a manned reception, IT and telephony services, refreshment facilities, photocopiers, furniture, printers, decoration, a lounge/restaurant/bar, heat and light. You’ll usually be able to hire meeting rooms if you need them, and have access to video conferencing equipment, without the burden of having to purchase and maintain such equipment.
Cost: Hot desking is one of the cheapest office space options.
Flexibility: You hire and pay for a desk only when you need it, so it’s a really flexible arrangement with no tie-in.

Cons of hot desking:

No branding: You definitely won’t be able to extend your business brand and style into your office space, since you don’t have a space that’s allocated specifically to your business. In fact, the desk will be different every time so you can’t even personalise your desk space.
No visibility: You won’t get an entry in the directory of the business centre you’re in. There’s no visibility for your business at all.
Hygiene: You don’t know who’s been using the desk before you. Some 32% of people don’t wash their hands after visiting the loo.
Noise: The open plan nature of hot desking can make it noisy and distracting.
Disjointed: You (or your employees) may not feel particularly connected to your business, since you’re rarely together at the same time and have no attachment to a particular space either. This could lead to demotivation, or disloyalty.

Virtual offices

With a virtual office, your business is registered to a business centre, but you don’t have a specific physical presence there. The business centre will offer a number of flexible options – at the lowest end of the scale, they will simply hold your mail for you to collect. For extra cost, they can take your calls and forward your mail. There are usually shared facilities available when you need them, such as a lounge, bar or restaurant area with wireless. You can also rent rooms for meetings, interviews and training.

Pros of virtual offices:

Business address: A virtual office address gives you a professional business address while allowing you (or your staff) to work from home.
Privacy: Using the virtual office address as your registered office address keeps your home address private.
Prestige: You can select a prestigious location for your business, without the prestigious price tag.
Branches: You can have a virtual office in a number of areas, making it appear as if you have several offices. You can of course use the facilities for each location.
Cost: Virtual offices are one of the cheapest office space options.
Facilities: You can use the lounges when you need a space to work, without extra charge (and even meet clients for lunch there). You can rent meeting rooms for a small extra fee when you need them so you don’t have to pay for them when they’re not in use. You can usually rent shared desks too (hot desking).
Equipment Virtual offices are usually well equipped with telephony and data facilities, copying, fax etc, which you can make use of while you’re there, without having to buy or maintain any of the equipment.
Flexibility: It’s easy to upgrade to another office space option when virtual offices are no longer sufficient for your business, or even to move your location.
Networking: Virtual offices are great for networking as you’ll find loads of like-minded people using the facilities, especially in the lounges and bars.
Environment: Since there is less commuting to a workplace (so less pollution) and because utilities are shared (so lower energy bills), virtual offices are a more environmentally friendly option.

Cons of virtual offices:

Weak impression: A virtual office address may not make the best impression when a customer realises it’s not a physical office. For some businesses where trust factors are really important, this may not be ideal.
Solidarity: You don’t get as much interaction with other people as in a traditional office, since you’re working from somewhere else – probably home – most of the time.
Supervision issues: It is more difficult to supervise staff, run meetings and train people where your business doesn’t have a physical location.
Discipline: You have to be very self-disciplined to work from home and not to be distracted by anything and everything.
Noise: Although included in the fee, shared lounges can be noisy and distracting and not ideal working environments when you need to concentrate.
Sharing: Resources are shared, as is support – so what you want might not always be available, and it may take you longer to get what you need.
Lack of branding: Although you can meet clients at the virtual office (in the lounge areas or in meeting rooms) you can’t extend your business brand to the office space.

So what’s the best option?

No one office solution is going to be right for every business! It depends on a lot of factors, such as your budget, industry, clients, facilities needed, any special equipment and location. However, for most businesses, serviced offices are going to be the best option. There’s no capital outlay, no long term tie-in, and there are some really competitive deals available.

The best features of a serviced office are that they:

are easy to budget for with a single fixed fee to pay every month;
allow businesses to rent less space (because of savings on, e.g. the reception and meeting rooms);
allow businesses to be visible and make the right impression; and
allow businesses flexibility to move, expand or decrease their space without penalty.

When compared with the other office types, serviced offices usually come out on top.