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Which is Better: Business Centre Vs Long Term Office Lease

January 17, 2019

The answer to this question is not as clear as it used to be. Technology has given rise to staff mobility and the ability to work effectively from remote locations. Traditional offices are often located in densely populated city centres making commuting time – unproductive time. This same space is in high demand, is often at a huge premium cost, and frequently underutilized. Managers looking to improve efficiencies are considering decentralized staff, while maintaining a strong corporate city centre presence, all be it with a smaller footprint.

Alternatively, small business and entrepreneur’s starting up a new venture often simply cannot afford office space in large office towers since the rental cost is high. There are minimum office sizes that are often too large for a small company. Add to that challenge, the demand by property managers for long term lease obligations and personal guarantees, particularly if you’re a start-up. This all leads to a simple conclusion. A business centre offers a more cost-effective solution, and you can still occupy Class A facilities otherwise unattainable.

Here is an example of potential cost savings and assuming the following;

  • Minimum office lease for 1,200 Square Feet
  • Space required for 4 – 6 Staff
  • Shared working space, or private space with fewer workstations
  • Class A office in a highly desirable location
  • Typical construction costs, and conditions
  • Conservative net rents used, includes T.M.I.
  • Some additional costs may be included in lease, varies by property manager
  • Additional cost savings possible, by using office services on a variable cost basis, reduced staffing

The business centre solution is not the perfect solution for every situation. The more staff you have, the less likely that it will be cost competitive. This conclusion is challenged by the fact that organizations today are highly mobile, and the consideration is not how big the organization is, but rather how many workstations are required at a given time or at a given location.

Corporate offices are on average 70 % utilized. In a city centre location at $ 70 / per square foot, this is an approximate lease cost of $5,600 per employee per year, at 80 Sq. Ft. per employee. The consideration might be, is it more efficient to have some of the office space in a location more convenient to staff members, or the client? Should it be in a remote location, and in a flexible environment that can adapt to the needs of the business? This is the benefit of a business centre location. It may not completely replace the city centre office location, but could be a flexible remote office solution.

Law firms, as an example, often use business centres in suburban locations, to appeal to local clientele that simply won’t commute to a city centre for services. If you consider the use of Virtual Office Space as yet another alternative, the cost can be very low.

Here is the cost break down based on actual experienceof both worlds.

Which is Better: Business Centre Vs Long Term Office Lease

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