What Are The Business Advantages Of Renting Office Space?

There was a period, following the COVID-19 pandemic, during which the working landscape seemed to be shifting to a work from home model across almost all sectors. This had initially been driven by the lockdowns imposed during the pandemic itself, and, following a period of imposed working from home, much media coverage at the time tended toward reaching the rather extreme conclusion that office based working was a thing of the past.

On the other hand, some media (and indeed political) commentary at the time focused on the undesirability of the home working model, claiming that a large-scale switch to working from home would impact negatively on productivity levels. As is often the case, the truth of the matter lay somewhere between these two extreme positions, and the post-pandemic working model in Scotland is now levelling out in a manner which means that office space is still very much in demand and is likely to be so in the future.

Hybrid Working

Research published in the final quarter of 2023 – following a survey of 15,000 professionals and employers, including 886 in Scotland – found that the number of employees working in a hybrid manner, blending home working and in-office working, was levelling out, with 39% adopting a hybrid working model and 39% working full time in the office.

Other figures from the survey included 68% of employees stating that they offer hybrid working and 71% stating that they had refitted their working spaces, including offices and meeting rooms, to facilitate a hybrid working approach. Steps taken by employers included the installation of cameras, microphones and large screens to facilitate meetings between employees in multiple locations. It should be noted, however, that 27% of employers anticipated that their approach would change in the next 12 months, with increased employee attendance required, and 56% of people saying they would be willing to accept a job in the future which didn’t offer hybrid working.

Office Space Demand

Survey results are one thing, of course, but the cold, hard market realities across Scotland seem to confirm that businesses are buying into the requirement for high quality, flexible office spaces. Not only are office spaces of this kind generally more suited to the hot-desking, hybrid working model which now predominates, but they are also far more likely to meet the kind of environmental, social, and governance (ESG) standards which customers and potential customers increasingly demand of brands and businesses.

According to research published by the global real estate group CBRE, the final quarter of 2023 saw demand for office space reaching pre-pandemic levels in Glasgow, with vacancy rates of just 2.89% across Grade A office space and 97,528 sq ft. of office space taken up in total across the city during the final quarter. In Edinburgh, meanwhile, the figure for office space take-up was in line with the five year average, with the number of individual deals, 165, up 13% on the previous year.

In Aberdeen, during the third quarter of the year, the figures for the office rental market were even more striking. Take-up of office space in the city reached 141,789 sq. ft., which was an increase of 167% on the previous quarter and 196% on the same period in 2022. At the same time, availability of office space across Aberdeen was the lowest it’s been since 2015, at 2,124,448 sq. ft., with Grade A space in particularly short supply at just 206,538 sq. ft. We know all about renting prime office space in Aberdeen, and in this article we’ll be looking at the advantages of renting rather than purchasing office space, some of which – flexibility and up to the minute facilities – have already been briefly touched on.

Flexibility

Perhaps the greatest advantage of renting office space is the flexibility it offers. If recent years have taught us anything it’s that instability is often just around the corner, from the varied impacts of Brexit to the pandemic and the cost of living crisis. Renting office space makes it much easier to respond to changes in the wider economy or across a particular sector with speed and efficiency. You may experience a sudden spike in demand for your product or service, for example, and need to expand the amount of space you have available for employees to work in. Alternatively, a shift in the market could lead to a temporary drop in demand, and the ability to scale up or down in circumstances such as these is absolutely invaluable.

Purchasing an office space outright means being locked into specific premises with set costs no matter what happens in the wider world. Increasingly, however, commercial landlords are responding to the demand for commercial agility by offering short term and more flexible leases or even tailored individual rental packages. The ability to rent the ideal office space with the option of being able to amend or even exit the lease at any time without suffering financial penalties makes it easier to cope with problems or take advantage of opportunities.

Finances and Facilities

Linked to the operational flexibility mentioned above is the financial advantage to be gained by leasing rather than purchasing. The decision to lease involves a much smaller initial capital outlay, something which will be particularly helpful for start-ups keen to concentrate their spending on areas which will help to drive business growth, such as product development, marketing and sales.

Going forward, the monthly rental outlay is likely to be much lower than a mortgage would be, and in many cases will cover the cost of services or facilities which would otherwise have to be paid for from business turnover. The details will vary across different office spaces, but facilities likely to be covered by the rental costs could include security, car parking spaces, shared kitchen facilities and the ability to hire extra spaces such as meeting rooms. In addition, the upkeep and maintenance of the exterior of the building and any communal areas will be the responsibility of the landlord, as will liaising with utility companies.

As well as saving money on the bottom line cost of premises, leasing arrangements of this kind will make it easier for a business to manage cash flow, safe in the knowledge that unexpected costs such as building repairs or upgrades are handled on their behalf. First class facilities which are well-maintained and upgraded on a regular basis will also make it easier to attract and retain the best employees, many of whom now regard a pleasant working environment as a must-have rather than a perk.

Teamwork

The benefits of hybrid working for the morale and work-life balance of individual employees have been publicised at great length, but from a business point of view there are just as many benefits to having a shared space in which the members of your team can come together in person to collaborate. Despite the effectiveness of video calling and online communications, there are some business situations, brainstorming sessions or complex meetings for example, which definitely work better if the people involved are in the same room feeding off each other’s energy and enthusiasm.

In addition to these specific one-off occasions, the simple fact of having people together in the same building is bound to help foster a sense of loyalty to the business and to each other, as well as facilitating the kind of casual networking which often helps to drive innovative thinking. Having a team together in one location, even if only for a percentage of the working week, will encourage everyone to buy into the wider ethos of the business and expedite the completion of particular tasks.

Location

The location of your office could make a huge difference to the success of your business in multiple ways. In the first instance, being close to transport links will make it easier to convince employees or prospective employees of the benefits of hybrid or office based working, as will optional extras such as landscaped surroundings.

Many businesses will also gain from being located closer to similar or sector-adjacent businesses, such as other energy services companies. A prime location of this kind could make it easier to attract clients, and help to position your business as a leader within your given sector, as well as opening up the possibility of networking with useful businesses located nearby. Any or all of these are much easier to achieve when renting rather than purchasing an office space.

The cost of purchasing a city centre space in a prime location is likely to be beyond the reach of all but the biggest businesses, for example, while renting in the same location will cost much less initially and on a monthly basis. In addition to the businesses located nearby, there are often likely to be other businesses located within office units in the same building, or same business park, something which may well throw up more opportunities for networking and collaboration, particularly if there are any shared communal areas.

Image

No matter how large or small your business is, it’s vital that you convey a professional image to any customers or prospective customers. In the first instance, simply having a bricks and mortar location to refer customers to will help to instil confidence and trust in anyone deciding whether or not to spend any money with your business.

Over and above this simple fact, however, a rented office in a modern, well-appointed building – such as we offer at Davidson House, Aberdeen – will foster the image of a successful, professionally run organisation. After renting an empty office space you can transform the appearance in line with your branding, ensuring that a rented space is no less bespoke than one which has been purchased outright.

Many landlords now offer additional services such as office planning and fit-outs, so if you’re unsure of exactly how to transform an empty office into a working space they can help to tailor it to meet your precise requirements. The cohesive branding of an office space can also play a part in attracting business partners and employees, as well as customers. This is particularly true for start-ups which would otherwise not have the funding needed to purchase and then brand an office space in a prestigious location.

ESG

Environmental, social and governance standards (ESG) have an increasingly important role to play in consumer choices. According to the Sustainable Consumer 2023 report published by Deloitte, 30% of consumers stopped purchasing particular brands or products due to ethical or sustainability related concerns. Further research by KPMG found that 67% of consumers actively try to seek out green choices for some of the products and services they buy, while research published in the Financial Times stated that having a clear ESG strategy and being able to highlight efforts made toward sustainability targets such as net zero makes mid-market businesses more attractive to investors, partners and acquirers.

Increasingly, being able to point to factors such as working in a low carbon building with energy efficient measures in place will be seen as a highly desirable brand differentiator. If a purchased office doesn’t meet ESG criteria then the cost of retrofitting things such as efficient heating and cooling systems could be hugely prohibitive. Renting on a flexible basis, however, makes it easier to seek out those office spaces which have ESG friendly factors built into them, as landlords have come to recognise just how important issues of this kind have become.