Managed Offices vs Traditional Offices

Securing the right office space is essential to support your business needs and future growth. Choosing poorly hinders growth and may result in a time-consuming office relocation. As such, it is helpful to develop a keen understanding of the key differences between a traditional office and managed office space.
A leased office is a long-term commitment. Considerable time and effort are invested in an office search, including seeking approvals, contract negotiation, and more. The process requires many months before you can move into the office.

A managed (serviced) office is completely different. Bowman House, as an office provider, offers a range of offices of various sizes for immediate rental. These private offices are flexible workspace solutions, accessible 24/7, and rented at a fixed monthly cost. The business amenities at the Bowman House Business Centre include super-fast broadband, air conditioning, and a staffed reception area.

To help choose the right office space, let us examine managed (serviced) offices closely before moving on to traditional ones.

Managed Offices: An Overview

When considering managed offices versus traditional offices for the first time, it can be confusing for people new to the office market. Have no fear – we explain below.

Renting a managed office is simpler, largely stress-free and completed in far less time. For business owners or busy office managers, it is reassuring to know that the office provider makes their lives easier. Managed offices are fully managed, prepared, and fitted-out offices ready for use. They come with furnishings, flooring, connected utilities, cleaning services, and several amenities.

The services and amenities provided are significant for tenants. For example, fibre-optic internet is included as standard. No tethering a shaky mobile internet connection while waiting for an appointment date to get the internet hooked up. It is present from day one, including anyone visiting on-site in the reception and communal areas. IT support is also available, so if an issue arises, the technical staff are ready to resolve it quickly.

The lease contract length for a managed office is typically 3 months in advance, with a 1-month cancellation notice period. Some managed or serviced office leases are for a minimum of 6 months. The shorter leases – in months, not years – provide greater flexibility than traditional office leases can provide.

Traditional Offices: An Overview

Traditional office space is rented from the building’s landlord. Leased at an agreed rate per square foot, these offices usually come completely bare. While this may be preferable for some tenants, others may feel overwhelmed and require an experienced office manager to complete all requirements before moving in, which can be many months later.

All furnishings must be purchased or other arrangements made. Upgrades and maintenance, unless agreed in the lease, are the tenant’s responsibility. Utilities require setting up with local suppliers. Any building maintenance must be carried out, other than what is specified in the lease.

Lease Terms and Legal Obligations

Most leases are what is called a “full repair and insure” lease, which means the tenant is fully responsible for all maintenance and repairs for the duration of the lease. There is also an obligation to undertake any dilapidations — restoring the premises to its original state — at the tenant’s cost at the end of the lease.

Security is also a concern. A receptionist for the building might be included, or visitors are required to review a list of tenants and visit the appropriate floor. A secure key fob system for all external doors and floor-level access protects employees from surprise visitors. This will not usually be included.

IT Setup and Connectivity Requirements

From a technical standpoint, any network wiring, routers, access points, repeaters, and other equipment that allow employees to use an internal network must be set up. Telephony and internet access require connecting to the local telecom provider and being compatible with new phone equipment, computer systems, and networks. An IT team is necessary to ensure all equipment functions properly from day one.

Lease agreements fall into two categories: long-term lease agreements and short-form leases. Short leases are a minimum of 18 months and might still have a 3-year duration. Standard lease agreements typically require a commitment of 5 to 10 years to the space and location. In an uncertain business landscape, that is a big ask. Lease contracts also require substantial upfront deposits.

Comparing Managed and Traditional Offices

Let us compare a managed or serviced office (at Bowman House, we use these terms interchangeably) and traditional offices.
In the office space market, they are miles apart in terms of what you can expect to pay, how flexible they are, their customisability, and any services or amenities offered.

Cost Comparisons

Let us begin with floor space calculations. What amount of space does each employee require? A good benchmark is between 60 and 100 square feet per employee.

Example: Affordable Managed Office Space at Bowman House

Fully furnished office space as a managed office is very affordable. For example, one rentable office at Bowman House, Office 35, Bowman House Business Centre, is just £513.00 + VAT per month for a 183-square-foot office that supports three people. That is extremely affordable per square foot, given that it includes utilities, telephony, internet access, IT support, cleaning, and other amenities. The deposit arrangement varies depending on the office, but is usually 3 months, with a 1-month notice period.

Traditional Office Costs and Fit-Out Expenses

Leased office space in London often requires a deposit equivalent to 3 to 6 months’ rent. Monthly rents per square foot in London range from £25 to £45 per square foot for Grade A or B office space in up-and-coming areas of town, rising to £75 and £100 per square foot in popular locations such as Covent Garden, North Oxford Street, or Clerkenwell and Farringdon. Fit-out costs can range from £100 to £250 per square foot for a new tenant.
As you can tell, managed offices are more cost-efficient. This is especially true considering the bundled services, which simplify calculations and remove variability in budgeting. Few businesses can reach an economy of scale where renting a large office building begins to make sense.

Legal and Setup Costs: Managed vs Traditional Leases

Managed offices are ready to occupy, and the provider will usually have a standard template licence agreement that is easily understood by your lawyer. While there may be a small administration fee to set up the licence, it is typically very low. By contrast, a traditional lease will involve two sets of lawyers billing by the hour to agree the format and complete the lease, with the landlord’s legal costs often paid by the tenant. You may also need to cover the cost of surveyors to agree on a formal schedule of dilapidations. This legal and professional involvement is a major source of both cost and delay in the leasing process.

Potential hidden costs in traditional offices surprise many first-timers. Maintenance and repair costs are somewhat unpredictable at first. Insurance and property taxes are extra charges. Additionally, service charges, business rates, and early exit fees can stick in the throat. Managed offices completely avoid most of these concerns.

Flexibility and Scalability

A managed office is typically offered on a lease of 3 to 6 months. Companies can effortlessly scale their offices up or down based on current results and future growth prospects. For example, Bowman House has managed offices for 1 to 12 people, depending on availability. Their flexible terms and ability to scale are major advantages for business operations that require ultimate flexibility.
Traditional offices come with multi-year lease agreements and require months before a tenant moves in. This allows for minimal flexibility in office size or for supporting the expansion or contraction needs of a business. For dynamic businesses, managed offices are often a better option.

Control and Customisation

Managed offices offer reduced control over office design, office layout, and potential branding opportunities. Typically, offices are furnished and come equipped. Some office suppliers are willing to discuss which furnishings are provided, subject to availability. This is the trade-off.
Traditional offices allow tenants complete control over fit-out, office layout, furnishings, lighting, and almost everything else. This comes with the financial responsibility for all of it, their replacement, and maintenance.

For businesses requiring control and customisation, some of their office spaces may remain traditional. However, other office spaces that do not require this level of specificity lend themselves to the serviced/managed office model.

Location and Accessibility

Prestigious office locations enhance a corporate image; unflattering locations distract from it. Overpaying for skyscraper views and marble floors in the reception area hurts the bottom line. Perception matters in location decisions, yet modern business centres deliver excellent aesthetics for tenants and visitors alike.

Accessibility for people with disabilities is more important than ever. Older buildings struggle to cater appropriately. Companies have legal responsibilities to consider in this area. Managed offices are often newer builds that are better equipped to support everyone’s needs fully.

Managed offices best support location flexibility. A traditional office lease typically locks the tenant into the same location for many years, whereas managed offices only require a few months in one location.

Services and Amenities

Common managed office services include:

• Receptionist during office hours.
• Mail handling.
• Utilities provided.
• Telephony access.
• Fibre-optic internet.
• Kitchen and communal areas.
• Parking spaces, bicycle spaces, and EV vehicle chargers.
• Cleaning services crew.
• Security systems, e.g. key fob access.
• Building and grounds maintenance.

With Bowman House, security is ensured via key fob access 24/7 into the business centre. In addition to kitchen access, our offices are conveniently located near the Royal Munchies Café, where you can grab a late breakfast or a quick lunch before heading back.

Traditional offices offer either no services or the bare minimum. This hampers business operations, especially in the first months of a new tenancy, where time is lost ironing out additional issues.

Value-added services with managed offices may include organised networking events for local businesses. Communal areas enable a mix of tenants to discuss their work, socialise, and potentially collaborate on new projects.

The Case For Managed Offices

Managed offices allow new businesses, ones scaling up or down, or relocating to pursue their goals without delay. While traditional offices have their place for large corporate clients, they prove overly restrictive and limiting in a rapidly changing business environment.
Professors’ teaching business at the degree level often correct students when they are asked about the main objective of a business. Staying in business comes before profit, philanthropic goals, or other concerns. The managed office model supports this by allowing far greater control and flexibility over office costs and lease durations. The ability to grow with expanding markets or cut costs in contracting ones, each has its place.
Traditional offices often constrain entrepreneurs inappropriately, resulting in higher expenditures when costs must be reduced. These put added pressure on the employee headcount – staff the company must retain to survive sudden downturns. Making well-informed decisions about office space allows businesses to navigate slow periods and emerge successfully on the other side.

Conclusion

Both managed offices and traditional offices have their place.

Managed offices are more affordable, easier to manage, and come with a range of services and amenities. Their lease terms are more favourable, with 3 to 6-month leases being common. Deposits are often 3 months, with minimal time required before moving in.

Leased office rentals require time to locate, negotiate, fit out, set up, and move in. Lease terms typically range from 3 to 5 years, with durations of 5 to 10 years more common. Unlike with managed offices, the office layout and customisation options are entirely up to the tenants. However, that all comes at a steep price and substantial delays.

When looking for a new office, consider all aspects. We are happy to discuss your specific needs and book a tour of our managed office facilities at Bowman House. Our detailed guide on the available office spaces is also available. Please get in touch to see how we can help you.