Serviced and Managed Offices: What’s the Difference?
Our expert advisors at Realty CP are often asked what the difference is between a serviced and managed office. Due to an overlap of features that appear to be quite similar at first glance, there exists some understandable confusion about what differentiates the two arrangements. To help business owners and managers who are considering either of these options, we’ve put together a handy guide to clearly outline the benefits and disadvantages of both.
What are the key differences between serviced and managed offices?
A serviced office, as with serviced apartments, is a workspace that can be rented on a flexible, short-term basis and offers inbuilt facilities such as clerical support, reception staff and WiFi. A tenant pays an all-in cost per desk each month and will typically sign for a term of 1-12 months. The office space is fitted out and designed to the specification of the provider, enabling a tenant to simply turn up and start working.
A managed office is similar to a serviced office, in that both provide flexible space that is operated by a separate party. However, the key difference with this type of office is that a managed office requires greater input from the tenant, with the space itself a blank canvas that needs to be filled. A tenant must define their exact requirements, from the number of desks, chairs and meeting rooms to floor finishes, so that the provider can deliver exactly what is needed – effectively making a managed office a custom-built workspace. A tenant is normally required to commit to term of 12 months but rather than pay per desk, a tenant pays for the amount of space they occupy.
The benefits and disadvantages of a serviced office space
The contract length for a serviced office can range from just one month up to 3 years, making this style of arrangement particularly suitable for startups and small businesses that value flexibility and want to minimise upfront capital expenditure such as furniture and partitioning.
The Key Benefits
- Ease of set-up – Office-as-a-service style solutions provide ready-to-go premises where you can simply turn up, plug in your IT equipment and start working.
- Greater flexibility – Shorter contracts offer a much greater degree of flexibility for younger companies with changeable growth forecasts.
- All-inclusive – Modern providers offer a range of attractive, all-inclusive features such as: breakout areas, free tea, coffee and WiFi, meeting rooms, and social spaces.
- Collaborative environments – A shared serviced office space can often provide smaller businesses an increased level of networking opportunities and encourage collaborative working.
- Simpler accounting – An all-inclusive contract means just one invoice, which can be paid monthly for greater control of cash flow (unlike conventional leases which are paid quarterly).
- Low set-up costs – Serviced solutions relieve tenants of the significant upfront capital expenditure associated with conventional leases.
- No dilapidations liability – Landlords can’t seek undefined financial settlements for building damages at the end of the contract.
The Key Disadvantages
- Limited branding opportunities – Besides, perhaps, removable adhesive versions of your company logo on the doors or windows; a serviced space will otherwise be very limited in terms of customisation. This enables the host to quickly relet the space once you have vacated it.
- Higher cost per square foot – Having everything set out for you, including access to communal meeting rooms and other perks, means you may pay a premium for use of those services and all-inclusive amenities.
- Extras may be expensive – Should you require extras, such as a dedicated meeting room for use by your business only, you may have to pay a much higher price compared to what you might pay with an in-built meeting area.
The benefits and disadvantages of a managed office space
The average contract length for a managed office is typically between 1-3 years, making this a more suitable option for scaleup businesses and SMEs. A distinct advantage of a managed contract is the flexibility it offers to brand and customise the workspace.
The Key Benefits
- Bespoke set-up – Unlike serviced space, managed offices can be fully branded and customised in terms of interior design, furniture, and wall art.
- Built to order & spacious – A managed office is usually let on a per square foot basis, rather than by the number of desks within the space. Therefore, you pay for the amount of space you occupy rather than the number of desks you take.
- Simpler accounting – As with a serviced arrangement, a managed office presents the perk of one, all-inclusive invoice each month – offering smaller businesses greater control of their cash flow.
- Flexible deposits & lower set-up costs – Sourcing a short or long-term conventional lease can be very cash flow intensive, given that some landlords request the equivalent of 12 months’ rent in advance for a deposit, aside from of the capital expenditure required to fit out an office. A managed office arrangement is much more flexible, as the provider pays for the fit out and deposits vary between 2-3 months rent.
- Client-friendly – A managed space is arguably better for servicing the needs of your clients as the breakout areas and meeting rooms within the unit are for your use only rather than shared with other businesses, as is often the case with a serviced style arrangement
- No fees – Conventional leases require the tenant to pay solicitors’ fees, agents’ fees and stamp duty. As the managed space is controlled directly by the host, these fees do not apply under this type of arrangement.
The Key Disadvantages
- More expensive (than a lease) – As with all good things, the tenant pays a premium for the flexibility, management of the office, and bespoke nature of the fit out.
- More time intensive – In contrast to a serviced style arrangement, where you can simply turn up and start working, a managed office transaction requires a tenant to allow enough time for office to be fitted out.
So, which type of arrangement is suitable for your business?
By now, hopefully, we have cleared up any confusion you might have had in understanding the differences between a serviced and managed office space. As a general guide, a serviced licence agreement is most likely to be most suited to younger businesses with high growth forecasts, as the flexibility provides greater ease to scale up. A managed office is most likely to suit a more established, small to medium size business, looking for a longer term arrangement that can be fully customised and branded to meet exacting requirements.
Still not 100% sure which type of office is suitable for your business? Take a look at our handy flowchart, then answer the simple questions to find out which arrangement is the right one for you.
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