Market Insight

Serviced office or conventional lease? That is the question for London occupiers in 2024

January 10, 2024

Despite the rise in office take-up in London in Q3, with some 2.7m sq ft of office space let in the last quarter of 2023, many occupiers are still unsure about what their office requirements will be over the coming years.

They remain under immense pressure to provide a high-quality office environment to entice teams back into the office, whilst also ensuring that property costs are kept to a manageable level amid continuingly high inflation.

As businesses establish their post-pandemic office requirements, we are seeing some already commit to new Grade A office space, albeit on a smaller footprints, to meet their new hybrid working patterns. This resulted in lower vacancy rates for Grade A space at the end of 2023 in London, against an overall office vacancy rate of 10%.

However, there remains a significant proportion of businesses who are either in vastly under-utilised leased premises or are bursting at the seams in their current offices. This is leading many companies to reconsider their office requirements in 2024 – whether they have a lease ending in the next 12-18 months, or not.

With this in mind, one of the key questions on the lips of London occupiers in 2024 will be: Is serviced or conventional office space the best option for our business? To help answer the question, London occupier expert, Matt Waite, explores the pros and cons of serviced offices over conventional office leases.

Benefits and drawbacks of the serviced office

Serviced office space comes at a cost premium, but it can provide the perfect solution for those businesses that need flexibility to grow without the long-term commitment of a traditional lease.

Whilst the overall cost is more, it will give your business an element of certainty around what your monthly bills will be, as your start-up and reinstatement costs are averaged out over the period of your stay.

However, whilst serviced offices come in all shapes and sizes, it can be difficult for businesses from certain sectors, such as professional services, to find an option to suit their office culture and corporate identity.

Benefits	Drawbacks
All-in-one monthly property cost covering most of your running costs.	Potentially expensive if you don’t need flexibility or additional luxuries. Fit-out, dilapidations and operator profit are built into your monthly cost.
Less office management required – cleaning, recycling etc. taken care of.	Can be difficult to establish brand identity or create desired culture.
Flexibility – ability to agree short-term licence.	Challenging if you have lots of client or customer visitors. You may also be required to pay extra for booking meeting rooms.

The pros and cons of a conventional lease

Whilst conventional leases typically don’t offer the same level of flexibility as serviced offices, they can prove to be a better solution for more established businesses with long-term plans – provided you know how much you are likely to grow over the next few years.

However, the conventional lease requires more initial expenditure on things like fit out, and can take longer to negotiate, with the added potential for expense at lease end too, through dilapidations costs.

Benefits	Drawbacks
Good for established businesses with better idea of long-term growth plans.	Longer lease commitment with less flexibility if business changes dramatically during lease term.
Allows management of workplace environment and culture through personalisation of space and fit out.	Potentially time-consuming acquisition process, from negotiation and legals, to fit out and move.
Ability to negotiate better deals with landlords if committing to a longer-term lease.	Requires capital expenditure for office fit out. However, this can be offset with the right advice, by negotiating a rent-free period or acquiring a fully fitted office.
More economical over the longer-term, without requirement to pay for flexibility if you know it is not required.	Potential dilapidations bill at lease end, however this can also be reduced with the right advice.

A hybrid option to match a hybrid workplace

In a move to bridge the gap between serviced and conventional office space, many landlords are now offering fully fitted plug and play options on conventional leases and may also offer rents inclusive of business rates and service charge or other managed arrangements.

This can provide you with some of the benefits of both the serviced office and conventional lease options, with shorter lead-in times, less upfront capital expenditure and more control over your space and corporate culture.

So, perhaps the answer to the question of whether to go for serviced office or a conventional lease in 2024 is neither? To match the hybrid workplace, you might be able to secure an office which will give you the best of both worlds.

As with anything, there are pros and cons to each option and, ultimately, what you decide will depend on your business’ current situation and future needs.

To help inform that decision, our dedicated London Occupier Team can assist with everything from establishing the right option for you, to finding and securing the right London office premises.

For a no obligation discussion about your office requirements, get in touch.

Find a person

Freehold Residential Development Millway Close, Oxford

£300,000

Serviced office or conventional lease? That is the question for London occupiers in 2024

Despite the rise in office take-up in London in Q3, with some 2.7m sq ft of office space let in the last quarter of 2023, many occupiers are still unsure about what their office requirements will be over the coming years.

Benefits and drawbacks of the serviced office

The pros and cons of a conventional lease

A hybrid option to match a hybrid workplace

Freehold Residential Development Millway Close, Oxford

£300,000

Despite the rise in office take-up in London in Q3, with some 2.7m sq ft of office space let in the last quarter of 2023, many occupiers are still unsure about what their office requirements will be over the coming years.

Benefits and drawbacks of the serviced office

The pros and cons of a conventional lease

A hybrid option to match a hybrid workplace

Key Contact

Matt Waite

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