How To Know If You Are Ready For A Long-Term “Traditional” Office
Imagine you are a small- to medium-sized company. Your business is at a stage where you want to create a lasting brand legacy. You are more “grown up” as a business – you need your own space, own design, and complete control in building your culture and internal operations. Flexible spaces, while convenient, cozy and collaborative (just some benefits, to name a few), can become far too costly as your team grows. With a long term space, you have the opportunity to not only make a physical footprint for your brand, but to also reduce costs as your headcount becomes more stabilised.
Nonetheless, long term office leasing is not suited for all businesses. Before making a huge commitment, it’s important that you understand the factors that go into such a decision. Unsure if you are ready to have your own space? Read on to learn more about the factors you should be prioritising before finding a long term office for rent.
What factors should be most important to you?
- Identity = a physical presence that cements your brand position
The most important priority for businesses searching for long term space is establishing a strong brand identity. Having your own office is a sign to clients and investors that your business has reached an established level of growth. A traditional office is not just a home base for 3 or more years – it is also a great way for you to build your business ecosystem. Most businesses will headquarter close to their clients, suppliers and partners – this forms a strong, physical network where you can collectively build your brand and business together.
In flexible spaces, particularly coworking spaces, a business’ individual identity may be diluted due to the diversity of members sharing the same space. The existing culture of a coworking space may already be so strong, leaving you little opportunity to make your own mark. At a long term office, you are free to customise fit-outs and have complete control over your work culture.
In most cases, you own (or rent) all furnishings and interiors, giving you ultimate flexibility to design your space. According to a global study conducted by JLL, designing an office with an open layout, sufficient natural lighting, and views of nature is significantly correlated with improved productivity. Beyond that, branding your office space can be an effective way of communicating a company’s philosophy – both to visitors and the employees who work there. For example, Glaxo Smith-Kline’s new Singapore headquarters in Buona Vista encourages active movement with strategically-placed staircases and in-house gym facilities. These features uphold the firm’s brand position as a global health company.
- Convenience = accessible location with amenities for employees, clients and investors
Convenience is a factor that is important to consider for any workspace, whether flexible or long term. However, given that a traditional office will be housing your business for three years or more, it’s more important than ever that both employees and visitors can easily access the space over the long haul. When it comes to convenience, there are three main aspects to consider: location, building type, and access to amenities.
Location: Especially for client-facing businesses that expect a lot of visitors, it is crucial to be located in an accessible area near a client base. Most modern office buildings are located in city centres or other major business clusters, which tend to be in close proximity to public transport hubs. Other businesses that deal with heavy physical supply, on the other hand, may prefer to be located near warehouses or airports.
Type of building: In Singapore, there are three main “grades” or classifications of office buildings. Grade A office buildings are the most premium workspaces, offering a wide range of in-house amenities and housing a prestigious tenant composition. Grade B buildings are also well-maintained, but are just a notch below Grade A buildings in terms of quality. Lastly, Grade C buildings are older units that often require extensive fit-outs or renovations. Grade A buildings offer the most convenience from the beginning, but lower-tier units can nonetheless be fitted-out into top-quality spaces, especially with good space design.
Access to amenities: Most modern office buildings in Singapore are equipped with a reception concierge, building security, and air-conditioning. Some others provide underground parking and integrate retail/F&B options in the same complex. With more attention being paid to sustainability in recent years, newer office buildings also include energy-efficient solutions.
- Infrastructure = technical connectivity to support operations
Depending on the individual needs of your business, you might also have certain requirements for infrastructure and the structural design of the building. Tech companies, for example, might consider offices with enough floor-to-ceiling height and chilled water supply to accommodate large servers. Likewise, floor loads should also be heavy enough to carry the weight of large generators. Marketing companies, in contrast, may not require nearly as much physical infrastructure and can put less emphasis on these structural elements. Client-facing companies may instead put more emphasis on the look-and-feel of the building.
Regardless of your needs, leasing a long term space gives you the option to install bespoke infrastructure (including IT and fit-out) that best suit the nature of your business. Flexible spaces, on the other hand, have the space fitted out so that companies can “plug and play” but have little to no say in how the space is constructed.
- Function – a customised mix of work, collaboration and social spaces
A report published by Ted Moudis Associates highlights how workspace design trends are moving towards employee satisfaction and retention. As a result, modern office spaces now include a diversity of workstation options that do not confine employees to a single space throughout the day. There are four main types of office layouts, each with different impacts on the proportion of private spaces to breakout areas.
- Hybrid mobility – mix of unassigned and assigned workstations and support space
- Activity based – fully assigned open plan, workstations and support space
- Open plan – fully assigned open plan workstations
- Cellular space – fully assigned offices and/or high partition workstations
In general, the first three types offer high functionality with open plans and the balance of assigned and unassigned workstations. Employees are free to move around and collaborate, somewhat mimicking the interactive environment featured at coworking spaces. In this case, however, the interaction is kept within your team. Cellular space layouts, on the other hand, fall in line with “traditional” long-term offices, with exclusively private spaces and high upfront costs. Nonetheless, cellular spaces may be suitable for legal and FinTech companies that may require extensive data privacy and security.
At a long term office, you have control over the layout of your space with customized fit-outs. You can create a mix of office layouts that work best for your company. Flexible spaces, on the other hand, are already predetermined and may not cater to the work styles you need.
What factors should be least important to you?
Getting your own first office space can be a big leap. It’s understandable for you to be price conscious in the beginning. While price is an important concern, from our experience, we’ve learned that it should be one of the last factors to consider when choosing a long term space. It’s more important that you like the space and it suits your top priorities, namely: identity, convenience, infrastructure and function. The price is negotiable, especially for longer leases, but the four walls of the office you choose are not.
- Affordability – expenses that align with economic performance
As such, affordability should not be a top concern for businesses considering a long term space. Nonetheless, there are three main costs to take note of: rental, capital expenditure, and operating costs.
Rent is a fixed amount per month, with an additional rental deposit usually covering 2-6 months’ worth of rent. Capital expenditure refers to the funds spent upfront on fit-outs and renovations. Operating costs cover ongoing maintenance of the office building, including utility fees, repairs, property taxes and insurance. To compare like-for-like, you should factor in capital expenditure for a long term lease with the flexible space option. In Singapore, the cost of fit-outs depends on the amount of work needed and any design requirements. Fit-out costs normally range between SGD $50 to $120 per square foot. For businesses looking for their own space, the long-term gains in brand identity should make up for any upfront costs.
However, down the road, long-term office spaces are not necessarily costly. Most traditional office leases in Singapore go for 2-3 years with an option to renew. The longer the lease, the more negotiating power you have with landlords, who are looking to save costs by maximising the term of tenancy. Additionally, capital expenditure can also be depreciated over 5 years, resulting in less taxable income down the road.
An important consideration to keep in mind is the impending change in accounting rules. Beginning in 2019, all commercial leases now have to be included in balance sheets. The total amount of the lease will be recorded as a large upfront liability, which may negatively impact a business’ ability to acquire loans and investments. If you feel this change is not a big concern for your business, however, then occupying a traditional office space may be a viable option.
- Flexibility – scalable space that can accommodate changes to headcount
Flexibility is the last thing you would expect from a traditional office. For the most part, it is not a pressing concern for businesses seeking out long term space. When you sign a lease for a long term space, you are obligated to fulfil the complete term of the contract. Most businesses at this stage have a stable headcount and do not foresee big changes in the next couple of years. If the size of your business is unpredictable, you should consider flexible spaces instead.
However, if flexibility is a concern for you, there are still possibilities. More and more companies are beginning to sublet unused space in their long term offices as flexible space. Others are creating their own, such as Unilever’s LEVEL 3. Companies needing more space for an expanding headcount sometimes tap into nearby coworking spaces. Alternatively, they rent underused office space from corporates and other businesses.
The category of “long term space” is a broad one, with so many types of space to consider. The line between flexible and long term has also become increasingly fuzzy. Some landlords are shortening their leases to 1-2 years, while others are allowing existing tenants to sublet their space for as long as 1-2 years. In Singapore, certain space types like shophouses have varying lease terms that can range from 1 to 3 or even 6 years.
Ultimately, a long term office for rent is great for companies that want to cement a strong brand identity. They want to own a location that is convenient, with customised infrastructure and a design layout tailored to their business needs. Concerns like price and flexibility are lower on the list of priorities. Are you looking to establish your own office space?
At GorillaSpace, we’re here to help you at every step of this journey. On our platform, you can find an extensive catalogue of long term offices for rent throughout Singapore, covering everything from industrial buildings to shophouses to Grade A buildings in the CBD. Before you book a visit, you can view high-quality visuals and 360 panos of each space.
If you have more specific requirements, try our smart recommendation engine, GorillaSearch. All you need to do is to tell us about your business needs and our engine will produce a shortlist of relevant workspaces for you to consider.
Stay tuned for follow up articles in this series that break down the specific steps involved in leasing a long term space.
- Productivity At The Heart Of Office Design.
- Embodying Brand In The Workplace.
- Workplace Design Is Changing, Part 1: It’s All About Employee Convenience.
- JLL’s “the square” Tool.