Q&A
Q. I am running a small start-up business and I need to find an office. I want something that is value for money but also looks good for our clients. Can you give me some tips?
A. When cost is a factor you must consider all of the other charges involved in the upkeep of an office including the capital expenditure required to kit it out with desks, chairs, kitchens, bathrooms and so on. These costs can quickly add up, so a good solution for a small business is a serviced office, which is often more cost-effective.
David Hume, head of tenant representation in the West End for commercial property firm Cushman & Wakefield, says that if you need to meet clients regularly than choosing a serviced office in a central location with good transport links is a must. If you are a financial business than the city could be the best location for you.
However, in the past decade more hedge funds and private equity firms have moved to Mayfair and St James’ Square. As the downturn has bitten, these areas have become more affordable. Whereas 18 months ago an office in Mayfair could charge £100 per square foot per year, rents have fallen to about £50-60.
“Overall, rents have fallen 38 per cent in the Grade A spaces like Mayfair. Now more people can afford to look in these areas, whereas in the past they would have been out of reach for most start-up businesses,” says Hume. Location is also important to attract and retain staff. “Your workforce are your most important commodity, so if you want to retain staff you need to be in a place where there is a bit of life,” he says.
While location is an important consideration for both small and large businesses, there are some unique considerations if you are looking for an office for a start-up. If the business grows you need to be able to accommodate more people with relative ease. A modern, open-plan office space can do this more effectively than a period building where you have more constraints with space because there are walls you cannot move.
Think about what the atmosphere inside will be like. It’s vital to be able to control the temperature, says Hume, so you should also look for a good air conditioning system. Also, raised floors allow you to store away wires and power points – this means less clutter and also makes the space safer, without the risk of tripping over a stray cable.
To ensure you generate a good first impression, a client-facing business should opt for an office with a manned reception and a good quality entrance. But in the aftermath of the financial crisis it’s probably best to avoid gilded walls or anything too flashy, as this can create the wrong impression in these less-prosperous times.
Finally, Hume says that negotiating a flexible contract is particularly important for a start-up business. If you sign a 10-year lease make sure that it has a break clause included after three or five years. “With a start-up it’s very difficult to see how well it will do in the next few years – it might not even remain in business,” says Hume. “If you don’t have a break clause then you could be lumbered with having to sub-let.”
Many contracts stipulate an upward-only rent agreement, which means that your rent costs will increase with every rent review. However, Hume recommends that you try and negotiate a “cap and collar” agreement in the contract. This means that landlords cannot raise the rent above a certain level, which is a more efficient way of controlling costs for a small business.