Your choice of office space touches on everything from profit margins to your company culture, so it's important to get it right. What are the differences between serviced, managed and leased offices, and how do you know which best suits your business?

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Serviced offices: flexible space… but less control

Serviced offices can be called different things, such as co-working space. And there are different types of serviced space, from self-contained offices to communal hot desks.

In essence,serviced offices are all-inclusive workspaces; you sign up, plug in and start working. A fixed, monthly charge covers rent, business rates, fit-out,furniture, utility bills and dilapidations. IT infrastructure is also supplied for you, although often at an additional cost.

Some operators may offer workspace on a monthly basis; others will want a minimum 12-month commitment.

Each operator has different building styles, service, quality and flexibility, so you can choose what works best for your business.

The main advantage of serviced office space is you don’t have to commit to a long lease which can be an advantage if you are scaling up or down. It can also be useful if you need extra space for a fixed-term project. And this type of space should be ready to occupy immediately, so no long lease negotiations or fit-out.

Serviced offices can also provide a fantastic sense of community; some offer quirky features and community activities, creating a lively atmosphere. Small teams,start-ups, companies in a similar growth phase can help you feel part of something bigger.

If you have a young team, having an energetic atmosphere could well be some thing they value.

So, what are the disadvantages? Compared to a lease commitment over the longer term, the cost will generally be higher as you are paying for flexibility.

You will also have to sacrifice control for convenience; the space won’t be tailored to your requirements or particular branding. If you have your own office, you might be able to install your company signage and branding, but this will depend on the operator.

The quality of space may vary across an operator’s portfolio, so it’s important to choose the right building.  

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Most suitable for fixed term project teams, small companies or those that are either growing or contracting in size rapidly.

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Serviced offices at a glance

✔️  Flexible

✔️  Ready to occupy

✔️  Part of a business community

❌  More expensive

❌  Less control and no personalisation

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Managed office space: more control… but more expensive

Managed offices can be a happy medium between serviced office space and leased office space.

Agreements typically run from two to five years, so longer than serviced offices but shorter than a conventional lease. You can usually negotiate some flexibility before signing the lease, for example, agreeing to extra space or reducing your space on set dates to align with your business plan.

The office fit-out is to your requirements, and the costs spread over the term of the commitment.It means you get to tailor your workspace to suit your business and brand, but,crucially, the process is managed for you. Having your fit-out costs spread over the term of the commitment minimises the upfront capital cost.

Your fixed, regular payments to the operator will also cover dilapidations and furniture as well as rent, business rates and services charge, making occupancy costs simpler.  

The main disadvantage of managed office space is that it can work out more expensive than serviced offices;  you are paying not just for the convenience but also to put your stamp on the space.

If you only wanted a two-year lease, for example, but a tailored and expensive fit-out, the cost per square foot will be disproportionately high. However, you can work with the operator to value engineer the fit-out cost.

And if you occupy only part of a building, the operator will still dictate all the communal spaces' look and feel.

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Most suitable for businesses seeking the benefits of a conventional lease with control over space and branding but with added flexibility, fixed costs, no up-front capital expenditure, limited liability and everything managed by an operator.

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Managed office space at a glance

✔️  Convenience

✔️  Personalised space

❌  Expensive

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Leased office space: cost-effective… but less flexible

Leases on conventional office space are typically a minimum of five years, although you may find a 3-year lease.

You will most likely have to commit to a larger chunk of space – a whole floor of a building or even the whole building but landlords may offer rent-free periods or other incentives to secure a deal.  

Short of buying the building, leased office space will give you ultimate control. You can model the space to suit your needs and branding, choosing everything from desk layout and style of meeting rooms to the colour scheme. If you occupy the entire building, you can also style the reception area to suit.

Leased office space works out more cost-effective in the long term, partly because the lease commitment means reduced risk for the landlord, which usually translates into a lower net rent.

You can help cultivate your own sense of community by designing the workspace to suit with layouts that encourage teamwork and collaboration or huddle rooms and hot-desking as well as quiet spaces for focused tasks.

You can also add your own style and branding to support the atmosphere you want to create.  

Upfront cost and convenience are potential disadvantages. You need to allow plenty of time to plan conventional office space and will need to commit for longer. Fit-out requires upfront capital expenditure and takes time. Added to that, the acquisition process can take between six and 12 months.

You'll be responsible for appointing the consultants and services you need to make the space functional from cabling to lighting, furniture, design and branding. In addition to rent, you'll need to pay business rates,service charge, utilities, fit-out and furniture. So, planning initial and whole-life costs is important.

In addition, the upkeep, maintenance and dilapidations when you leave will be your responsibility.

A potential alternative solution to taking long term space without the hassle and cost of fit-out is fully-fitted space, referred to in the market as "cat A +" or"plug and play" space. It's worth shopping around to see whether'plug and play' space is available as this can be more cost-effective and quicker to move into.

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Most suitable for businesses that want complete control over space and branding and are confident about their space requirements for the next five years or so. An acquisition process typically takes six to 12 months so the ability to plan ahead is also a prerequisite.

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Leased office space at a glance

✔️  Cost-effective

✔️  Personalised space

❌  Hassle of organising fit-out

❌  Longer-term commitment