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Direct Office Lease, Serviced Lease and Co-Working

Unsure of the differences between a Direct Office Lease, Serviced Lease and Co-Working? Making the best long term decisions for your business is key.
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The information detailed below outlines the differences between a direct lease, serviced offices and co-working spaces for businesses commencing their office leasing search in the Brisbane CBD. Each office accommodation option has its own point of difference and will suit businesses at various stages of their life cycle. This article will allow you as a business owner to make the best decision for the future of your business at any given stage.

Direct Lease

A Direct Lease is the most prevalent and sought-after office leasing commitment in any market. Traditionally, these agreements require commitments in excess of a 2-3 year term, though on a per desk or per sqm basis they are typically the most cost effective route. With this more permanent option there is naturally less flexibility in the lease, which is a fair trade off to consider when balanced with a reduced cost.

When businesses enter the direct leasing market, there are a host of different tenancies they can pursue. These vacancies include speculatively (spec) fitted tenancies, existing fit-outs and unfitted spaces.

The option chosen is largely driven by the business’s size, growth expectations, type of clientele and desire for flexibility. Of late, spec fit outs have been the most popular for small to medium sized businesses. These spaces are built without commitment to cater to a broad variety of business types and needs, with the expectation that only minor alterations to up-spec the space may be needed.

Coming from a different perspective, larger corporations tend to pursue unfitted tenancies where they can build a custom fit out from scratch, and subsequently incorporate their preferred layout and corporate colours. It is also typically a better option for larger businesses as spec fit out options tend to only be available up to a certain square meterage. Large communal meeting spaces, office intensive fit outs, and needs specific to the particular business are common aspects of these turn-key spaces and are not features often found in spec fit outs.

An aspect that is commonly overlooked is a formal working address. For start-ups, this is important but not essential, and having a mailing address may be sufficient to their needs. Alternatively, businesses that are very clientele and competitor oriented will seek to establish themselves in the market, and having a formal working address as their reference point not only resonates with consumers, but also generates greater involvement with staff and interest for future employees.

Finally, something that may be taken for granted is the level of privacy and confidentiality offered by having a space to yourself. The level of importance of this may not be realised unless a business was to work from a shared facility for some time, but is often an appreciated point once its value is realised.

In all, Direct leases are the preferred avenue due to their ability to provide stability and consistency for businesses seeking to establish their base and grow over the course of a mid to long term lease.

Key Aspects

  • Development of business identity
  • Official business address
  • Exclusivity to work spaces
  • Greater flexibility & autonomy around tenancy design
  • Greater client facing capabilities
  • Highest level of privacy / confidentiality

 

Serviced Offices

Serviced offices are office spaces that are leased and operated by management companies or office providers, who then offer a consolidated service to smaller sub-tenant occupiers. Examples of operators providing this service include; Regus, Servcorp, Workspace365 and Corporate House to name a few.

A range of business types occupy these spaces, from major corporates to start-ups. Unlike Direct Leases, the serviced office provider in this case acts as the head lessee and effectively ‘sublets’ spaces while providing wide ranging services to their tenants. Businesses are able to rent anywhere within the available space on the serviced floor/s, from executive offices, small private rooms or even hot desk options. Serviced offices are traditionally fully furnished and ready to occupy for tenants looking to assume space in a quick turnaround. They are, however, very generically fitted, offering little creativity in the way of design and layout.

As an alternative to direct leasing, Serviced Offices have grown in popularity and prevalence exponentially over the last 5 years, courtesy of providers aligning with the increasing preference for work-flexibility. In addition, serviced office leases are advertised with the total cost up front, to be consistent over the period of the lease, allowing businesses to plan efficiently prior to signing.

Businesses are also afforded the opportunity to be represented by front of house staff employed by the serviced office provider, and can have access to back of house utilities (printing, fax, copiers), meeting rooms and kitchen facilities which are all inclusive as part of the gross cost. The “serviced” aspect of the offering makes office life simple.

Compared to Direct Leases, Serviced Office options will typically be more costly when assessed on a per-desk/per-person basis, as the flexibility afforded and service provided demands a premium. However, some facilities may be offered on a per usage basis, taking them off the ultimate bottom line if you don’t utilise them.

Key Aspects

  • Costs known upfront without variation
  • Shared utilities (Printer, Photocopier, Fax, Kitchen)
  • Front of house services and administrative support
  • Pay per use meeting rooms and conference rooms

 

Co-Working Spaces

Co-Working or Co-sharing spaces are newer entrants to the Commercial Leasing market. This service line offers workspaces that are flexible and are traditionally popular with small businesses or individuals who aren’t seeking a permanent working space, but one that can accommodate them on short notice. Users most commonly occupying these spaces are start-ups, freelancers and small businesses.

Co-working spaces have also been very progressive in their business model, leasing floorspace near larger corporations who require project space from time to time. This allows these businesses with an alternative to seeking a direct lease on a longer term basis, or shorter term options offsite in walking distance from HQ. This tact of positioning themselves as project / flex space has proven to be of benefit to all parties, with businesses heavy on project work such as Engineers, Mining & Resources firms or Government taking full advantage of this. As for the Co-Sharing operator, this has provided them with a platform of business that is more secure than just your standard single digit personnel or sole practitioners.

Key Aspects

  • Open desks in a shared open plan space.
  • Dedicated desks for individuals or businesses
  • Private Offices for individuals or businesses
  • Book by appointment meeting and board rooms
  • Book by appointment event spaces
  • Front/Back of house staff to facilitate

 

All in all, the decision to pursue a particular commercial office is subject to business plans and structures and supplying an environment that is best suited for business operations.

Businesses seeking to establish a presence and base of operations for staff and clients are recommended to pursue direct leases, while businesses seeking flexibility in periods of growth and uncertainty are encouraged to operate in serviced offices. Those that are constantly on the move or looking to operate for a few days a week are best suited to and recommended co-sharing spaces.

 

This article was written by Chris Jenkins. If you have any questions, get in touch with him on chris.jenkins@caden.com.au or 0413 506 179.