The future is in short term leases and long term views
If there is one thing we have learned from the past few months it’s that the property market was due a shake-up and the coronavirus has been a catalyst to what would have inevitably happened in the months ahead in any case.
As we witness the very public struggles of a major player in co-working and a business model that was simply not designed to be sustainable, we have been thinking about what tenants really want and how our community of workplace experts, agents, and landlords can meet the needs of businesses in future.
There are a few long-established options for companies needing space
- TRADITIONAL OFFICE SPACE is where the occupier maintains full responsibility of the space, all associated operations and services including fitting it out to their specification and managing all running costs. It’s usually a long-term agreement between the tenant and the landlord ranging from three to twenty years.
- SERVICED OFFICE SPACE is where the office provider operates the utilities, security, IT, cleaning, mailing and office equipment on behalf of the occupier, as well as fitted out space that multiple occupiers can move into immediately, sharing the facilities with other companies. Lease terms are typically short, ranging from one month to two years.
- MANAGED OFFICE SPACE is a blend of the two - a contract with the landlord, generally on shorter terms, from one to five years, including an element of bespoke fit-out or branding and often a package of services to provide further convenience to the tenant.
The rise of co-working
‘Co-working’ is simply a form of serviced office, rebranded with a promise of community, collaboration and inspiration from co-residents. These providers rode in on the coat-tails of businesses borne from the last recession, giving entrepreneurs and start-ups, who would otherwise be working from home or meeting clients in coffee shops, a workplace they could call their own.
What they also did was create a reaction from others in the industry. Other serviced office providers who had become complacent refreshed their spaces and their brands to good effect, whilst traditional landlords became nimbler, offering more flexible terms and moving into new territory of fitting out space for their tenants, covering the capital expenditure to secure tenants sooner.
The rise of co-working helped flip the balance of power between landlord and tenant, and consumer-led changes have ricocheted through the workplace industry since, with the standard of space improving and the focus on positive culture and wellbeing moving from gimmicks to credible long-term change in the way people work. As such there is little that a serviced office provides that a managed office can’t also provide.
They are equally well oiled and market savvy. Building locations, set up costs and operational costs are comparable. Services, lease terms, occupier terms, flexibility, pricing structure and the route to market are all the same.
The managed solution
However, there is much that managed offices provide that serviced or co-working spaces cannot. Where the serviced business model has proved to be financially vulnerable, the managed office can provide stability. And given the seismic shift in focus on health and safety since the pandemic, self-contained spaces also offer more environmental control and less risk than shared spaces.
What managed offices also do better is allow their tenants the freedom to look and behave in a way that is authentic to their business and people. They provide space that helps to build identity. The tenant has a front door, branding, choice of design, facilities, and an environment they can fill with a quality and style of items right for them. Along with this comes their own facilities, where employees can hop into meetings when they’re struck with sudden inspiration instead of booking through shared facility systems where availability is limited.
We believe there will always be a place for serviced offices to support start-ups in their early days, but what they haven’t pinned down, on mass, is tenant loyalty. Once a company reaches around 30 employees they tend to move on to an environment that is better suited to nurturing working culture and celebrating who they are.
Platforms for growth
Landlords who are able to provide short term leases and long term views to SMEs have the opportunity to reclaim some of the market share previously dominated by co-working brands and provide real, effective platforms for growth for tenants.
We are working with agents and landlords to find space for companies looking to move out of co-working, who want to elevate their identity and benefit from the kind of services they actually need to grow or right-size in an uncertain economic climate.
It’s possible in 4 simple steps.
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