Offices rental market in the UK is bouncing back: the demand for them gained 18% in the first five months of 2021 compared to the same period last year. 38% of businesses expect 75% of their workforce to return to the office.
Although the pandemic shattered the London offices market landscape, traditional and serviced operators remain its two core segments.
A traditional office is a private office space occupied by one business. The building owners let it with the help of real estate agents directly to the occupier. The lease period is usually longer than 5 years, the office size is more than 5000 sqft, and the interior decor is usually basic with no furniture inside. Business tenants renovate and redecorate the property by themselves, manage all the administrative tasks from cleaning to paying for utility bills, services charges and business rates. Usually, the whole building or whole floors are being let to one occupier. That is why it may be difficult to rent a traditional office of a smaller size.
Serviced or flexible offices are a relatively new format that became popular in recent years. These offices can be rented for a shorter period of time starting from 3 months (but usually, a year). The rent rate includes all services and administrative costs: modern interior and furniture, 24h reception, cleaning and more. Market leaders offer gyms to their residents where they organise yoga and pilates classes and other sports activities. In shared spaces, free tea and coffee zones are available, supplied with all sorts of tea, coffee and milk, including lactose-free.
Such flexible office concepts are present in Russia too but usually are associated with coworking spaces for self-employed and freelancers. In London, it is a more mature segment. It includes not only coworking spaces with their creative environment but also corporate offices: separate spaces of a size from 65-95sqft to thousands of square feet. They are being rented by different companies and are clustered within larger shared spaces. Companies that rent larger offices starting from 650sqft sometimes can enjoy having the whole floor for themselves. It is more common in small buildings of Central London.
We created a comparison table that demonstrates the pros and cons of traditional and serviced offices and shows which one is better for different types of companies.
Table 1. Comparison of traditional and serviced offices’ features.
Traditional offices | Serviced offices |
One company occupies the whole office space. | Many companies per building or even per floor. The occupier’s office is a part of a larger space with shared toilets, coffee zones, lounges and meeting rooms that can be booked to use. |
Without furniture and interior decor or with basic decor and furniture. The occupier does the renovation and organises the space himself. | Modern interior design and decor, with office furniture and working areas. |
The administrative tasks load is larger: the occupier deals with maintenance, arranges and pays for cleaning, pays for utility bills, service charges, business rates. The office may not have a reception but only a concierge during working hours. | Don’t require administration: the rent includes utility bills, service charges and business rates, 24h reception, maintenance, cleaning, shared spaces with meeting rooms, toilets and kitchenettes. |
The rent rate per sqft is lower. | The rent rate per sqft is higher. |
The size usually starts from 3300sqft. | The size of a rented space within the larger serviced office starts from dozens of square feet but residents can use shared spaces. Sometimes it is possible to rent a larger office, for example, the whole floor of 650 sqft. |
From 5 years. | From three months but usually with annual renewal. |
Rental costs are included in capital expenditures. | Rental costs are associated with operating expenses. |
Is better for large or established companies that are able to plan for 5-10 years ahead. | Is better for small and medium-sized businesses. |
Use this table to choose the type of office that best suits your company