Managed Offices vs Leased Offices: Which One Is Right for Your Business?

Securing the ideal office space is crucial to support your business requirements and future expansion. Choosing poorly restricts growth and may result in a time-consuming office relocation. As such, it is beneficial to develop a comprehensive understanding of the key differences between a conventional office and managed office space.

A leased office represents a long-term commitment. Substantial time and effort are invested in an office search, including seeking approvals, negotiating contracts, and other related tasks. The process requires many months before you can relocate to the office.

A managed (serviced) office is entirely different. Pinnacle House, as an office provider, delivers a range of offices of various sizes for immediate rental. These private offices are adaptable workspace solutions, accessible 24/7, and rented at a fixed monthly rate. The business amenities at Pinnacle House Business Centre include ultra-fast fibre broadband, comfort cooling, and a staffed reception area.

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

Managed Offices: An Overview

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

Renting a managed office is straightforward, 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 simplifies their daily tasks. Managed offices are fully managed, prepared, and fitted-out offices ready for immediate use. They include furnishings, flooring, connected utilities, cleaning services, and numerous amenities.

The services and amenities provided are valuable for tenants. For instance, ultra-fast fibre broadband is included as standard. No more tethering a weak mobile internet connection while waiting for an appointment date to get the internet connected. It is available from day one, including for anyone visiting on-site in the reception and shared areas. IT support is also provided, so when an issue develops, the technical staff are ready to resolve it promptly.

The lease contract duration for a managed office is typically 3 months in advance, with a 1-month cancellation notice period. Some managed or serviced office leases require a minimum of 6 months. These shorter leases – measured in months, not years – deliver greater flexibility than conventional office leases can offer.

Traditional Offices: An Overview

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

All furnishings must be purchased or alternative arrangements made. Upgrades and maintenance, unless specified in the lease, become the tenant’s responsibility. Utilities need to be set up with local suppliers. Any building maintenance must be undertaken other than what is outlined in the lease.

Lease Terms and Legal Obligations

Most leases are what is called a ‘full repair and insure’ lease, meaning the tenant bears full responsibility for all maintenance and repairs throughout the lease duration. There is also an obligation to undertake any dilapidations – restoring the premises to their original condition – at the tenant’s expense at the lease end.

Security is also a major concern. A receptionist for the building might be provided, or visitors are required to check a list of tenants and visit the appropriate floor. A secure access system for all external doors and floor-level entry protects staff from unexpected visitors; however, this will not typically be included.

IT Setup and Connectivity Requirements

From a technical perspective, any network wiring, routers, access points, repeaters, and other equipment that enable employees to use an internal network must be installed. Telephony and internet access require connecting to the local telecom provider and ensuring compatibility with new phone equipment, computer systems, and networks. An IT team is essential to ensure all equipment operates properly from day one.

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

Comparing Managed and Traditional Offices

Let us compare a managed or serviced office at Pinnacle House (we use these terms interchangeably) and conventional offices.

In the office space market, they are worlds apart in terms of what you can expect to pay, their adaptability, customisation potential, and any services or amenities provided.

Cost Comparisons

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

Example: Cost-Effective Managed Office Space at Pinnacle House

Fully furnished office space as a managed office is very cost-effective. For instance, one rentable office at Pinnacle House Business Centre, Office 15, costs just £750.00 + VAT per month for a ground-floor office that accommodates 4 to 6 people. That represents extremely economical value per square foot, considering that it includes utilities, telephony, internet access, IT support, cleaning, and other amenities. The deposit arrangement varies by office, but typically amounts to 3 months, with a 1-month notice period.

Traditional Office Costs and Fit-Out Expenses

Leased office space in Peterborough often demands a deposit equivalent to 3 to 6 months’ rent. Monthly rents per square foot in Peterborough range from £15 to £25 per square foot for Grade A or B office space in developing areas of the town, rising to £30 and £40 per square foot in prime locations such as the city centre or established business districts. Fit-out costs can range from £100 to £250 per square foot for a new tenant.

As you can see, managed offices prove more cost-efficient. This is especially true considering the bundled services, which streamline calculations and eliminate variability in budgeting. Few businesses can achieve an economy of scale where renting a large office building begins to make financial sense.

Legal and Setup Costs: Managed vs Traditional Leases

Managed offices are ready to occupy, and the provider will typically have a standard template licence agreement that is easily understood by your solicitor. While there may be a small administration fee to establish the licence, it typically remains very modest. By contrast, a conventional lease will involve two sets of solicitors billing by the hour to agree the format and finalise the lease, with the landlord’s legal costs often paid by the tenant. You may also need to cover surveyor costs to agree on a formal schedule of dilapidations. This legal and professional involvement creates a major source of both expense and delay in the leasing process.

Potential hidden costs in conventional offices surprise many newcomers. Maintenance and repair expenses are somewhat unpredictable initially. Insurance and property taxes represent additional charges. Additionally, service charges, business rates, and early exit fees can prove frustrating. 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 seamlessly scale their offices up or down based on current performance and future growth prospects. For instance, Pinnacle House has managed offices accommodating 1 to 12 people, depending on availability. Their adaptable terms and scaling ability represent major benefits for business operations that demand ultimate flexibility.

Conventional offices come with multi-year lease agreements, and it can take months before a tenant moves in. This allows for minimal adaptability in office size or for supporting the expansion or contraction requirements of a business. For dynamic businesses, managed offices often represent a superior choice.

Control and Customisation

Managed offices provide reduced control over office design, office layout, and potential branding opportunities. Typically, offices come furnished and equipped. Some office suppliers are willing to discuss which furnishings are provided, subject to availability. This represents the compromise.

Conventional 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 ongoing maintenance.

For businesses demanding control and customisation, some of their office spaces may remain conventional. However, other office spaces that do not require this level of specificity suit the serviced/managed office model perfectly.

Location and Accessibility

Prime office locations enhance a corporate image; poor locations detract from it. Overpaying for impressive views and marble floors in the reception area damages 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 crucial. 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 fully support everyone’s requirements.

Managed offices best support location adaptability. A conventional office lease typically locks the tenant into the same location for many years, while managed offices only demand a few months in one location.

Services and Amenities

Common managed office services include:

• Reception services during business hours
• Mail handling and management
• All utilities provided
• Complete telephony access
• Ultra-fast fibre broadband
• Kitchen facilities and communal areas
• Parking spaces, bicycle storage, and EV vehicle chargers
• Professional cleaning services 
• Advanced security systems, including secure access
• Complete building and grounds maintenance

With Pinnacle House, security is ensured through secure access 24/7 into the business centre. The facility offers over 100 on-site parking spaces, including 2 EV charging points, as well as kitchen facilities and break-out areas for the convenience of tenants.

Conventional offices provide either no services or the bare minimum. This hampers business operations, especially during the initial months of a new tenancy, where time is lost resolving additional operational 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, build relationships, and potentially collaborate on new ventures.

The Pinnacle House Advantage

Managed offices enable new businesses to scale up or down, or relocate to pursue their objectives without delay. While conventional offices have their place for large corporate clients, they prove overly restrictive and limiting in today’s rapidly changing business climate.

Business professors teaching at university level often correct students when asked about the main objective of a business. Staying in business takes precedence over profit, philanthropic goals, and other concerns. The managed office model supports this by allowing far greater control and flexibility over office expenses and lease durations. The ability to expand with growing markets or reduce costs in contracting ones, each has its place.

Conventional offices often constrain entrepreneurs inappropriately, resulting in higher expenditures when costs must be reduced. These create 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 challenging periods and emerge successfully on the other side.

Key Considerations

Location accessibility should align with your business model and client base. While Pinnacle House’s position in Peterborough’s Fengate business area provides excellent transport links – just 2 miles from the city centre with easy A1 and A47 access – evaluate whether this location serves your specific client demographics and employee commuting patterns effectively.

The collaborative environment may not be suitable for every business culture. Companies requiring absolute confidentiality, frequent private meetings, or those with unique operational requirements might find the shared nature of managed offices challenging. Consider whether your business processes are compatible with communal areas and potential activity from neighbouring tenants.

Limited customisation options can significantly impact brand expression. While managed offices provide professional environments, they may restrict your ability to create distinctive, branded spaces that reflect your company’s identity. This standardisation, while economical, might not align with businesses where physical brand presence is crucial to their market positioning.

Conclusion

Both managed offices and conventional offices serve their purpose.

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

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

When seeking a new office, consider all aspects carefully. We are happy to discuss your specific requirements and arrange a tour of our managed office facilities at Pinnacle House. Our detailed guide on the available office spaces is also available. Please contact us at info@pinnaclehouse.co.uk or call 01733 857600 to discover how we can help your business today.