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23 February 2019
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Phil Sugden

4 December 2018 Phil Sugden

Phil Sugden says shorter leases for businesses will lead to greater flexibility. 

Leases are rapidly becoming an outdated idea and, under more flexible workspace contracts, agreements can be negotiated based on inclusive managed contracts priced on a per-workstation basis with no capex or risk. 

The typical challenge for a small business that has outgrown its existing premises is quickly finding and setting up an alternative location with access to high-calibre talent. 

Extensive lease lengths can restrict SMEs from finding a new workspace wholly suited to their growth strategy.

Historically, firms opting for the traditional lease model have committed to the security of 10, 15 or 20-year leases. As business plans often change several times over long lease terms, this certainty has come at a critical price of flexibility.

But integrated service offerings, such as Managed Office Solutions (MOS), now exist with contracts lasting three to five years, which means companies requiring closer alignment of their accommodation requirements with their business needs can expand or downsize as required.

When expanding under the traditional office lease, businesses are required to self-source and invest substantial capex in a large ‘from-scratch’ project. Outsourcing fit-out and FM providers when relocating offices can be a costly and time-consuming process. And exit fees and dilapidation costs can be a weighty expenditure at the end of a lease.

As a result, SMEs now view their office space requirements as a strategic component of their business plan and opt for more flexible leasing options at a fixed price.

By having a single cost for the property, FM, fit-out and ongoing management, flexible methods remove what can be considerable associated upfront capex, while allowing business funds to be used more effectively on opex for the property itself.

Phil Sugden is director at flexible workspace solutions provider Portal Group