Pauline Hudson-Evans wonders if the days of the leased office are numbered….
The amount of empty office space in London has escalated over the past year and looks likely to rise again thanks to a mis-match of supply and demand: there is a significant rise in capacity just as demand is declining. A survey by Deloitte Real Estate has shown that the slowdown in the take-up of pre-used office space, coupled with longer periods to close rental deals, boosted availability by 36 per cent last year, with a further 19 per cent in the first quarter of 2017. Property investors chasing income must be facing alarming capital losses, I would have thought.
But companies are still in business, so if they’re not in traditional leased offices, where are they?
Our own experience at Hudson Walker International is typical. We started life as a partnership in 1993 in a Knightsbridge serviced office. We had our own small, self-contained office, paid a monthly rent, and needed only to give a month’s notice to leave. When we incorporated the business in 1997, we decided to relocate to a leased office in Dover Street where we stayed for 20 years until the natural expiry of our second ten-year lease in April this year.
During most of those early years, we all needed individual desks, a dedicated meeting room, filing cabinets (lots of those!) landlines, fax machines, and so on. As time went on, everything started to be stored electronically, we worked from mobile phones and lap tops and frequently met clients and candidates away from the office. Our consultants occasionally worked from home. I would look around the 833 square feet of our premises and think: why am I paying so much money for a space which is so under-utilised?
As an executive search business, we are essentially a B-2-B service provider. The basic tools of our trade are who we know – our networks – a mobile phone, a laptop and a place to meet candidates and clients. In a changing business landscape, did we really need to have our own dedicated leased office? Too, did I have the appetite to commit to a further lease for a minimum of five years, at an annual rent of 1.75 times the passing rent, before the consideration of the service charge and a looming contribution to the cost of modernisation of the common parts? Should we go back to a serviced office solution?
As the expiry date of our lease approached, I became aware of a third option: on-demand office space. A business acquaintance described it in a nutshell: “Flexibility free of concerns, with a pay as you go monthly billing routine.” I put it down as “sheer bliss” – not having to manage utilities, comms systems, rent, rates, service charges, cleaning, waste disposal, the stocks of loo paper. All these benefits are combined with lower running costs, and more of our time can now be spent on focusing on our core business. A further plus means we can work from home whenever convenient or drop into our shared office, with its unrivalled hospitality standards and state-of-the-art technology. It feels like the 21st century solution.
Considering the impact of premises costs on a typical profit and loss account, the move to flexible, on-demand space affords sound business planning and significant costs savings. It is certainly working well for us. We undoubtedly grew our business and reputation whilst we were in Dover Street for all those years, but those traditional set-ups now feel old-fashioned and financially over-burdening. So we are definitely in the right place right now. Here’s to the future!