Why Serviced Offices Are Gaining Popularity in the UK

As more businesses in the United Kingdom evaluate how they work in the post-pandemic world, many are increasingly turning to serviced offices.

Think of serviced offices like all-inclusive packages for office space, complete with furnishings, third-party IT and custodial services, and even snacks in the break room(s).

“There are no electricity bills, there are no (business) rates … it’s all included in your monthly business fee,” said Laura Walker, sales and marketing director at London-based Orega, which specializes in serviced offices.

Plus, how much space a tenant occupies and for how long is much more flexible in a serviced office compared to a traditional let. This flexibility is paramount to many businesses as they continue to experiment with how much office space they need and when they need it.

LoopNet delved into the world of serviced offices, gleaning insights from Walker about what serviced offices are, the advantages they offer and the current trends in the market.

Serviced offices are dedicated, fully built-out spaces for specific occupants, unlike coworking spaces, which are open and shared workplaces. These spaces often feature white walls, allowing tenants to personalise their space with signage and other customisations. They’re meant to be turnkey solutions to businesses seeking furnished accommodations, “plug-and-play” amenities and IT solutions that allow for quick moves.

Arrangements differ. Orega operates primarily under management agreements, a model that differs from traditional leases. In a management agreement, the serviced office provider partners with the landlord to operate vacant office spaces within the landlord's building. This approach is essentially a joint venture that involves shared investments and responsibilities. Unlike traditional leases, management agreements do not pose the risk of sudden lease terminations for a landlord.

The cost of renting a serviced office in the United Kingdom varies depending on factors such as location, size and services included. Orega’s serviced offices in London start at £375 per person per month.

There are a few main advantages for tenants of serviced offices:

• Flexibility. Unlike traditional leases that often require long-term commitments, serviced offices typically offer shorter contract terms. At Orega, serviced office tenants can initially sign up for just one year. This arrangement is preferred for startups, expanding companies or those with uncertain space needs.
• Scalability. Serviced offices allow businesses to easily scale up or down according to their needs. If a company suddenly needs more space due to a growing workforce or a specific project, it can often obtain additional space within the same building.
• Location. Serviced office providers typically have locations in prime areas, offering businesses the opportunity to establish a prestigious business address without the higher costs associated with traditional leases.
• Amenities. Serviced offices come equipped with various amenities, including reception services, breakout areas and meeting rooms. Cleaning and maintenance are also included in the monthly rate. These amenities and services enhance the overall workspace experience.
• Cost transparency. Serviced offices offer a flat, all-inclusive pricing structure, which means tenants don't have to worry about additional costs such as electricity bills or business rates. This cost transparency simplifies budgeting for businesses.

Serviced office providers like Orega cater to a wide range of clients, including small and medium-sized enterprises (SMEs) as well as larger corporations. Its serviced office agreements generally range from four to 200 workstations. Serviced office providers could offer space in an entire building or just a few floors of a multi-tenant building. The specific type of clients varies based on geography, with professional services, insurance companies, logistics firms and creative companies among the most common tenants.

While businesses can approach serviced office providers directly, many clients choose to engage brokers or agents to help them find the right space. Agents and brokers have in-depth knowledge of the market, which can assist clients in identifying the most suitable location and amenities for their needs. These professionals can also help negotiate agreements and navigate the competitive serviced office landscape.

The serviced office industry in the UK has witnessed several notable trends in recent years, including the following:

• Return to work. As businesses have been gradually returning to the office, Tuesday through Thursday has seen the highest levels of occupancy, while Mondays are starting to pick up. However, Fridays remain relatively quiet in terms of office attendance. A serviced office could allow a tenant more flexibility, or at the very least a shorter term, and help a company experiment with which days it needs office space.
• Quality matters. As businesses consider returning to the office, the quality of the workspace has become a significant factor. Companies are seeking serviced offices with well-designed breakout spaces, collaborative areas and amenities that cater to the needs of their employees.
• Monetising unused space. Some landlords are partnering with serviced office providers to monetise unused or "grey space" within their buildings. This approach helps landlords maximize the value of their properties while providing flexible workspace solutions.