How To Compare the Cost Of Leased and Serviced Offices

It is important that an occupier fully understands the cost obligations of office space and how this varies depending on the structure of the occupational agreement.

Leased Offices - Office Space for Rent

Leasehold offices are held by way of a lease between two parties – typically, the landlord and the tenant.

The lease documents the various obligations of both parties.

In terms of cost, a tenant is responsible for paying rent to the landlord.

Under the terms of a Full Repairing and Insuring (FRI), the occupier also pays for the upkeep and maintenance of their demised area (the space that they occupy) including items such as furniture, decoration, cleaning, utilities, broadband and insurance.

They will also pay a portion of the service charge proportional to the amount of space they occupy in relation to the whole building, to contribute to the upkeep of the whole building and common areas.

A tenant will also be required to pay dilapidations at the end of the lease to ensure that the demised area is returned to the same state of repair it was in at the commencement of the lease.

This form of office is priced on a square footage basis and is typically quoted as price per square foot per annum e.g. £50 per square foot pa.

Flexible Workspace – All-Inclusive Office Space

Flexible workspaces such as serviced offices, managed office spaces and co-working spaces are, typically, not held by way of a lease but on an occupational licence.

Typically, the monthly fee that is paid by the occupier is inclusive of ‘rent’ but also most other overheads including furniture, cleaning, utilities, broadband, service charge, insurance as well as additional items that vary from business centre to business centre.

Typically, dilapidations are not charged to an occupier of flexible workspace.

In contrast to leased offices, flexible offices are quoted and charged on per desk (workstation) per month basis e.g £500 per workstation per month.

Like-for-like comparison of the costs between leased and serviced offices is often not straightforward and often includes considerations of a business’ operational structure and specific requirements.