Serviced Offices: Who Occupies Them and Why?

Not so long ago, basing your company in a business centre had certain “fly by night” connotations, but not any more. With UK government departments and prominent Blue Chip companies increasingly outsourcing their accommodation, the business centre concept has not only become acceptable but is now seen as the smart thing to do. Organisations are coming to realise that the resources needed to run their own offices could be far more profitably employed on core business activities; and that outsourcing their requirements increases flexibility whilst diminishing risk.

In the large occupier market, organisations are entering into outsourcing contracts under which the supplier purchases the lease or freehold of their building, employs their FM staff and even manages space allocation, letting surplus space as serviced offices to outside organisations (whilst sharing the proceeds with the client).

This may be accelerating the respectability of business centre accommodation, but so too are the serviced office providers themselves at the quality end of the market. These organisations are buying prime office locations, refurbishing them to very high standards and then providing comprehensive office services and support. Prices are very competitive when you take total occupancy costs into account. As a result, even the smallest organisations can take office space in, say, London Mayfair and enjoy all the services and facilities of companies a hundred times larger by using the shared facilities.

Of course there are business centres and there are business centres, and for the purpose of this article we’re looking at the quality end of the market (sometimes known as 3 or 4 star centres) where occupiers fall into a number of broad categories.

Acquiring, equipping and staffing offices can be a major upfront cost for start-up organisations if they go down the traditional route. Organising phone lines, furniture, utilities, IT, office machinery and so on can be quite a headache – and then there’s the risk signing a five year lease for a brand new business. A serviced office, however, provides an “out of the box” solution. For a single, monthly payment you get the space, the furniture, power, rates, telephone lines, web access, you name it, all laid on. The best centres even provide fixed price office service and phone packages (with call answering to dedicated lines).

With minimum occupancy terms of as little as 3 months in quality centres and short notice periods, serviced offices are becoming an attractive, safe and logical choice for start up businesses. Further along the business plan, small to medium sized enterprises are discovering the flexibility serviced offices can provide. In particular, the best business centre companies provide the facility for occupiers to scale up or down the space they take after a minimum period, which in today’s uncertain markets is a real advantage.

Companies are also using serviced offices for their national expansion; opening offices in a different region to achieve a local presence in new markets. Again all the benefits discussed for start-ups apply here. And then there’s a strong cost argument, supported by the UK’s Institute of Purchasing & Supply whereby total occupancy costs are less for serviced offices if you need up to 30 workstations for 5 years or less.

Space allocation can be a real challenge for facilities managers in larger organisations. For example, an IT company might need to house 60 contractors for 6 months for a special project; or a government department might need to take on 80 extra customer support staff to deal with enquiries about a new development. Quality business centres are made for this purpose. They take care of all the hassle associated with equipping offices, putting in phones and then providing support. This solution also removes all pressure on the clients’ in-house office space - and flexible agreements can be made to allow extended occupancy if the project timescales slip.

The problem of arranging offices multiplies if you’re an overseas company coming to the country for the first time. Business centres recognise this and are reaching out to these customers, with initiatives such as Touchdown London for Chinese businesses.

The best business centres often have a mix of these kinds of client which makes for a vibrant community. As well as office space there are generally meeting and training rooms, reception, break-out and secretarial facilities, bringing “large company” office services and resources to even the smallest businesses. Some of the quality business centres are unbranded, so there’s no reason to suspect you’re even occupying a serviced office - and anyway, the entire issue is not at all what it once was.