Home Commercial Property The London business owner’s guide to property expansion

The London business owner’s guide to property expansion

by LLP Reporter
17th Dec 18 3:11 pm

Phil Sugden, director at flexible workspace solutions provider, Portal Group, discusses how rapidly growing SMEs can alleviate the extensive capex obligations incurred when relocating offices.

For both small and large businesses alike, an office move can be an increasingly daunting and time-consuming process.

The start of new financial years for many London-based SMEs, in addition to the surge in hiring talent in the first quarter, indicates that the New Year is a crucial time for growing SMEs to consider relocating their workspaces.

However, the uncertainty of the current market conditions, and of course Brexit, means that SMEs based in the capital are now required to adapt their operations to become more flexible than ever before.

The fixed terms and extensive lease lengths associated with the conventional leasing model can present significant challenges for SMEs experiencing rapid growth.

While unprecedented growth is one of the most esteemed characteristics of any successful organisation, research has found that 78% of SMEs actually delay moving offices due to the stress associated with property acquisition.

Despite this, property expansion is a fundamental phase for SMEs. Relocating to larger premises allows SMEs to meet fluctuating business demands, while also facilitating the introduction of a larger workforce.

Under the traditional lease, business owners must consider an array of different expenses, including fit out and facilities management at the start of a new lease, and dilapidations and exit fees at the end of their current lease.

In comparison to other areas of the business, property acquisition under the traditional office lease presents a substantial capex obligation, and the cost is not always guaranteed if the project is managed incorrectly.

As a result, London-based SMEs today are far less attracted to the financial burden of a lengthy traditional lease, and far more attracted to contemporary workspace contracts that can facilitate their future growth strategies.

Small to medium sized businesses are now viewing their office space requirements as a strategic component of their business plan, and thus opting for more flexible leasing options at a fixed price, with no additional costs.

In London today, the vast majority of traditional office leases require a commitment for a 10-15 year fixed term. For SMEs growing in a rapidly evolving market place, this can limit future business developments and changes to working culture.

The contracts lengths for managed office options, however, typically range from 3-5 years and therefore enable companies that require a high number of workstations, to more closely align their accommodation requirements with their actual business needs, allowing them to expand or downsize as required.

The first step of the property expansion process is sourcing a suitable building and location. Under the traditional office lease, businesses are required to self-source their chosen property. Packaged offerings will undertake a bespoke property search which closely aligns with business requirements, in addition to handling the entire project management, which will be combined into a single cost.

Once a suitable property has been selected, the terms of the contract can then be negotiated. This is a crucial time for SMEs to reflect on their growth strategy and meticulously forecast for how their property requirements could change over the given time period.

Once negotiations have completed, SMEs relocating under the traditional lease should begin the process of relocating their IT and telephony infrastructure. This is a critical part of the relocation process, and one of the biggest causes of reductions in productivity if not managed correctly. Managed office models integrate the IT move into the project, minimising business interruption and downtime.

The final stage of the expansion process is fitting out the new workspace. SMEs should carefully consider the time, resource and costs associated with designing and branding their new office. If opting for a conventional lease, this will need to be outsourced, in addition to sourcing the furniture and managing the utilities, which can present a substantial expenditure.

Businesses are also highly restricted on how they can utilise their office space to reflect their brand and organisational culture.

With simple, streamlined systems and structured terms from managed office options, business owners can invest their time, effort and money into their businesses, not bricks and mortar.

Simply put, the new wave of shared offices options are allowing start-ups and multinational businesses alike to not only access all the amenities they need at a cost-certain price, but to work within a flexible financial model that fosters their own unique growth and culture.

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