Choosing the Right Office Space: Traditional vs. Serviced Offices

For businesses navigating the complexities of private office space selection, the choice between traditional and serviced offices is pivotal. Each option has its distinct advantages and disadvantages, impacting cost, flexibility, customisation, and management. 

This guide provides a comprehensive comparison of traditional and serviced offices, highlighting key features, benefits, drawbacks, and cost implications to help you determine the best fit for your business.

Understanding Traditional Offices 

What are Traditional Offices? 

A traditional office, also known as a leasehold, FR&I Lease, or DIY Lease, involves renting a property from a commercial landlord, typically for a minimum term of three to five years. Occupants only pay for the rent of the space to the landlord and any costs such as fit-out, furniture and utilities are borne by the tenant themselves. The tenant receives a ‘blank canvas’ by the landlord which they can then customise and plan as per their business’s requirements.

Key features:

• Unfitted property
• Customisation of layout, amenities and furnishings
• Long-term contracts

Advantages of Traditional Offices 

Some of the advantages of traditional offices include, 

• One-time cost associated with the setup of furnishings and amenities. Unlike serviced or managed offices where the provider includes a fee for the management of facilities in the rent.

• The rental rate on a leased office space is locked for 5 years and landlords tend to offer 1-3 years of rent-free periods on longer leases.

• A tenant can fully customise the layouts to reflect brand identity and design all furnishings as per their requirements.

• Sub-leasing the office is always an option if a business cannot fulfil their entire term period.

Disadvantages of Traditional Offices

Some of the disadvantages of traditional offices include, 

• High up-front costs as the property needs to be fit-out by the tenant. The tenant also needs to work with an agent and consult a legal team before signing a contract, incurring a high cost.
• Longer lease periods with a 3rd year agreed upon break-in which may not be ideal for all businesses.
• Maintenance, repairs, utilities and business rates must all be incurred by the tenant on a monthly basis.
• Traditional office spaces require around 440 days from lease signing to move-in due to the extensive setup time. This delay is not ideal for businesses needing immediate occupancy.

Belcor, 15 Micawber Street, Hoxton, N1

Understanding Serviced Offices 

What are Serviced Offices? 

These offices are fully managed by a facilities management firm which offer immediate move-ins. Unlike a traditional office where the tenant is responsible for furnishing the office space, serviced offices come well-equipped, fully furnished and fitted-out. 

A serviced office building provides a tenant with their own private office on a floor shared with companies in other offices. They provide amenities such as shared access to breakout areas, kitchens, meeting rooms, and some even offer wellness rooms, gyms and even game rooms within the building. 

Key features:

• Private office space
• Furniture/Wifi included in rent
• Shared facilities
• All-inclusive rent pricing
• Immediate move-ins

Advantages of Serviced Offices 

Some of the advantages of serviced offices include, 

• Hassle-free rental payments. The tenant pays a set monthly cost per workstation to the provider which includes all utilities, bills, maintenance, repairs and business rates.
• They come fully-fitted out and do not need any furnishing to be set up by the tenant.
• Shorter term periods. A serviced office contract can range for any time between 1 month to 3 years.

Disadvantages of Serviced Offices 

Some of the disadvantages of serviced offices include, 

• Limited customization as the office comes fit-out and furnished by the provider. It is not possible to brand the office according to the tenant’s preferences.

• No dedicated meeting room space as all meeting rooms are shared by all companies on the floor.

• The cost for a serviced office is typically higher than a traditional office since it includes maintenance, repairs, Wifi and shared amenities that are all managed by a facilities company.

Workplace Plus, 89 Great Eastern Street, Shoreditch, EC2

Difference Between Serviced Offices Vs Traditional Offices 

Cost Comparison: Serviced Vs Traditional Offices

To get an idea on how much it would cost a 30 person company to work from either of the office types, here’s a breakdown of rent that a tenant can expect.

Serviced Office:

• Total Monthly Cost: £18,000 (£600 pp/month * 30p)
• Includes: Furniture, utilities, internet, cleaning, maintenance

Traditional Office:

• Ongoing Monthly Costs: £16,000
  • Includes: Rent, utilities, internet, cleaning
  • Doesn’t include maintenance

• Setup Costs: £60 - £110 per sq ft (one-time)
  • Total Setup Cost: £90,000 - £165,000
  • Setup Costs: £60 - £110 per sq ft (one-time)
  • Sizing doesn’t include kitchen, meeting rooms or lounge areas

Detailed monthly cost breakdown for Traditional Office:

• Ongoing Costs (per year) for 1500 sq ft:

• Rent: £80 x 1500 = £120,000
• Business Rates: £24 x 1500 = £36,000
• Service Charge: £12 x 1500 = £18,000
• Utilities: £5 x 1500 = £7,500
• Internet: £5 x 1500 = £7,500
• Cleaning: £2 x 1500 = £3,000
• Total Annual Cost: £192,000
• Monthly Total: £192,000 / 12 = £16,000

• Does not include sizing of common areas or maintenance fees

Summary:

• Serviced Office: Ideal for flexibility and immediate occupancy without upfront costs.
• Traditional Office: Can be better for long-term savings despite initial investment.

Ultimately, your decision should align with your company's financial strategy and growth plans. Both options have distinct advantages depending on your business needs and budget.