When thinking about setting up or expanding a business, a crucial decision to make is whether it is better to rent or own an office space. The decision will depend on your business goals, financial situation and plans for growth. Renting may allow for greater flexibility and allow companies to scale more, while owning provides full control and could work out more cost-effective in the long-run. In this guide, we break down the benefits and drawbacks of owning and renting office spaces and help you determine which option could be the best fit for your business.
Renting an Office Space
Choosing to rent an office space in London, rather than buy, has become the preferred choice for many businesses in recent years, especially for startups and companies who are expanding.
What are the Benefits of Renting an Office Space?
Renting an office space in the UK offers key benefits such as:
Greater flexibility
When renting, you benefit from a high level of flexibility. Lease terms for rented office space in the UK can range from anywhere between 6 months to more long-term leases such as 3-5 years. This flexibility means that you can choose a lease term that suits your business needs and goals. For example, if you are operating a startup or if your business is in a key phase of critical growth, you can get a lease with a fixed time period that matches those needs.
Scalability
Thanks to more flexible contracts, renting allows you to upsize or downsize your office as you see fit. This means you can change your office setting depending on the stage of your business, allowing you agility and adaptability.
Low initial cost
Unlike buying, the upfront costs of renting are relatively low as you will only need to provide a deposit and a few months’ worth of rent.
Outsourced responsibility
When renting, maintaining, repairing and managing the property tends to be the responsibility of the landlord. This takes the stress off for the renter and allows them to focus on running their business.
For serviced offices, utilities and cleaning are also often included so there are fewer overheads and time commitments to worry about.
Access to key locations
Renting allows you to use office spaces in cities in which it is notoriously expensive to buy – such as London or Manchester. Access to these central locations can improve business prospects and make it easier to meet clients or customers face-to-face.
Owning an Office Space
Depending on your business, owning an office space and having full control of the property could be the right option.
What are the Advantages of Owning an Office Space?
There are many benefits to owning your own office space including:
Asset appreciation
Owning a property can be a great investment. With commercial real estate generally appreciating with time, purchasing office space can allow you to gain a valuable asset as part of your portfolio – especially if there are a lot of big firms with their headquarters in the same area. As a result, you could benefit from long-term financial gain if you choose to sell in the future.
Fixed Costs
When you take out a commercial mortgage, you can benefit from stable monthly payments which can help you with long-term financial planning. With rent, you can never be sure how much prices will increase over time.
Full control
Owning your own office space means that you have full control over the property, its usage and any changes. You are totally free to make any customisations or renovations without the need for landlord approval.
Ensuring brand identity
If you have your own office space, you can align it with your brand’s identity, making the layout, design and decor support your ideal brand image.
Additional income from subletting
In the case that you have extra space, you might be able to sublet certain areas of your office space and generate additional revenue.
Greater stability
Owning a property for your business can provide a great deal of stability, meaning that you don’t have to worry about rent increases, lease renewals or relocation.
How to Decide Between Buying or Renting an Office Space
There are a few key things to consider when deciding whether to buy or rent an office space.
Cost
When buying an office space, you will need to make a significant upfront investment – not only a substantial deposit but the associated legal fees and potential renovation costs. While renting doesn’t have the same upfront costs, you will need to factor in the rental payments over time and the possibility of rent hikes and looking at where you can save money.
Flexibility
If you expect that your business could change in the coming years with regard to size or structure, it may be sensible to opt for renting rather than buying. This short-term lease structure can allow you to move to a larger or smaller office space depending on your business needs.
Location
With variable property prices across UK locations, it may be more viable to rent in some areas. In smaller towns or areas with lower property prices, buying might be a more sensible choice.
Long-term company goals
For companies whose long-term goal is to establish a permanent base, owning a property makes the most sense. However, for businesses in more dynamic industries or who are planning to undergo rapid growth, the flexibility of renting could be a better option.