Heading back to the office? Do serviced offices have a future now that Covid business support has ended?
The worst of the pandemic seems to be behind us. After two long years of living under its shadow, we are finally beginning to get our lives back to normal. However, normal has changed for many of us, especially when it comes to our working lives.
Here at Cedar Dean, we have been discussing the impact of the end of covid business support on businesses that lease offices, and we’d like to share our thoughts.
Businesses are embracing flexible working following end of covid support
Flexible working, remote working and working from home have become much more commonplace. Despite the end of covid business support, which helped businesses to help staff on furlough or working in different ways, many employers are still happy for a level of flexibility to remain in the post-covid world. However, a great number of us are now starting to head back into the office, at least some of the time, and are enjoying the benefits.
Why return to the office?
For the serviced office industry, the impact of covid has been complex. The industry relies on people actively heading to offices to work, but many are remaining at home. Those who are returning to offices are enjoying some major benefits. For example, there really is no way to replace the power of face-to-face collaboration when it comes to the creative process and for many businesses wishing to attract top-level employees, they’re struggling to lure them in without the added value of their top-notch offices.
For younger staff members, and for those just starting with a company or in a new role, being able to meet colleagues in person, share backgrounds and personalities, and learn from more experienced staff is essential. Therefore, most businesses of any size have maintained the view that having an office of some kind, even simply as a hub from which a selection of staff can work and collaborate, is something they will continue to support and, therefore, pay for.
Serviced offices offer a solution
For a great number of businesses, switching to a serviced office space for their employees could be a great solution. Switching from a long-term commercial lease to a serviced office means flexible office space that adapts to your needs.
Serviced offices are also usually conveniently located for office staff, often being positioned near transport hubs, shops and eateries, bringing life and economic support back to the UK’s town centres. However, some obstacles remain for businesses hoping to switch to serviced offices.
Are you struggling to exit your existing commercial lease?
We’re hearing from commercial tenants that they are struggling to switch to a more suitable serviced office arrangement because they can’t get out of their existing office leases. This is despite the fact that they are often completely unsustainable, having become unsuitable for the way they operate post-covid.
Serviced offices should, in theory, be a sustainable solution for businesses wanting to return to the office on a part-time basis. Ideally, businesses should be able to exit their existing leases if they are no longer affordable, directly due to changes that have taken place as a result of Covid. They should then be able to opt for a lease with a serviced office on a part-time basis, paying only for the days they want to use the offices and having their service fees adjusted on a suitable pro-rata basis.
Unfortunately, this isn’t happening. However, we are helping businesses to exit their unstainable leases now that their covid business support has ended.
What’s the right price for office space in the UK?
The question, though, is how much can you charge a company for using space only part of the time? Is it really practical for serviced office providers to be charging the same as they always did, pre-covid, for space that’s only in use part of the time? It’s going to take some time for the new way of working, post covid business support, to bed in.
The question of service charges
As well as the price of renting a serviced office, there’s also the cost of service fees to contend with. Over the various lockdowns in the past two years, some companies have been faced with full service charges for offices they haven’t been able to use. Serviced office providers are often tenants themselves, however, so the buck really should stop with the landlords.
Can rent reviews help leases to reflect the new way of working after coronavirus?
Commercial landlords should be listening to their serviced office tenants and ensuring that rent reviews take place sooner rather than later. Rent reviews that take into account the new approach to office working are essential for the sustainability of this business model.
There really is no reason why the serviced office industry should struggle in the post-covid world. After all, the demand for flexible working space was up by 37% in the first half of last year, according to research carried out by the Facilities Management Journal. However, leases for serviced office operators are likely to need restructuring, while rent reviews for serviced office users may also be necessary to reflect the new way we use offices.
There are a number of unknowns as we move into the future of office working and only time will allow us to fully understand the new world of white-collar work. However, in the meantime, our sustainable lease specialists can help serviced office operators to adapt and thrive with more flexible leases and rent terms that work for them and their customers.
