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Property Guide

How to find the right office space

Jump to: Project Management, Buying vs Renting, Setting out your brief, Budget, Location, Optimising your office, Finding a commercial agent, Hiring your ‘move squad’, Health and safety, Going green, Inspecting a building, Signing a lease, Communicate, review and improve

Moving into a new office is an exciting moment for any business. A well-designed workplace will help reduce costs, boost your ability to recruit and retain the best talent, and improve the productivity and profitability of your business. But finding the right commercial property involves having a clear vision and some meticulous planning.

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Project Management

Appointing a project manager who has the time, authority and understanding of your business is the best place to start. However, a good project manager never works in isolation. Finding an office to rent or buy requires teamwork, so setting up a working group of those with responsibility for facilities, IT, HR, finance, operations and marketing will also be vital. The project team should provide specialist information on their own particular field and collectively contribute to making the office move a success.

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Buying vs Renting

The first question a project manager should ask is whether buying or renting a commercial property is best for your company. Having a robust business plan will help you make the right decision. If you’re lucky enough to be able to consider both options, think about where your business wants to be in five years’ time and the space you’ll need for your staff.

If you choose to buy an office it is likely to be one of the biggest purchases your business will ever make, so make sure you can afford to have a large proportion of your capital tied up in real estate. Do you have enough left over to invest elsewhere?

On the flip side, the benefits of buying an office can reap clear rewards as your monthly repayments will go towards an asset you can sell in the future, as opposed to somebody else’s pocket.

If you choose to rent an office space, you’ll benefit from the flexibility many businesses need without being locked into paying a mortgage or business rate costs, which is why it is still such a popular option. Start-up businesses will often need shorter-term agreements that enable them to move as their business grows. This more transient model also reduces the impact of major rent hikes from a landlord if an area goes through a boom period.

On the plus side of the renting option, having a commercial property landlord means fewer responsibilities for your company. Dealing with unexpected maintenance issues can be time-consuming and frustrating. The landlord will also have an obligation to provide the right security for the building and ensure that health and safety regulations are adhered to. However, you should still run through the appropriate due-diligence checks to ensure that your company isn’t exposed to any risks.

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Setting out your brief

Part of your decision on whether to buy or rent will depend on your overall requirement for a new office space. Agreeing what you want to achieve with those at the top of your business will be vital. What are the non-negotiables for your office? Are there any ‘nice to have’ elements to bear in mind? When do you need to be in your new location? Make sure you agree these factors with your working group in advance.

Your brief should also communicate the company’s background, objectives and aspirations, as well as your financial objectives. It should strike a balance between corporate and workforce objectives. For example, profitability and productivity as outlined by your board, combined the wellbeing of your workforce.

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Budget

A crucial part of your brief will be outlining an overall budget, which will include regular rental or mortgage payments, as well as an overall budget for the move itself. Rent is usually paid on a quarterly basis, but landlords are increasingly allowing monthly payments. Services charges and insurance costs are usually billed at the same time.

You’ll also need to factor in business rates, which are handled differently in Scotland and Northern Ireland. Typically, these costs add around 40% to renting an office and are based on the rateable value (open mark rate) and uniform business rate (UBR). The government provides more detailed information about business rates.

If your budget for the move itself is on the smaller side, you may want to consider a serviced office which comes ready with amenities such as furniture and technical support. However, you will probably pay more for this kind of set-up if you stay longer than expected. Calculate the money saved on furniture, moving and the lease period before making a decision.

Remember to budget for all fees (including the services of an agent, surveyor, fit-out supplier and legal advisor) as well as search and registration fees. You will also be liable for Stamp Duty Land Tax, VAT charges (if applicable), any local authority charges and finance costs if you are borrowing money. Make sure you also put some money aside for moving costs and any works needed for the property.

The most important part of budgeting is staying within your means, understanding how the business plans to grow and finding a space to accommodate more staff.

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Location

Location is one of the most important factors when searching for an office. If you have an existing workforce, make sure the location is within a commutable distance for them. If not, your office needs to be in a good location to attract new talent. Remember to keep your clients in mind when considering a location: Can they park nearby? What impression does the area give? Will they be able to find your office easily?

Consider the different locations open to you, including city centres, suburbs or a business park, and take into account the local amenities that your employees will need. Your building specification should also be tailored to the needs of you employees. Prioritise vital factors such as disabled access, inter-departmental relationships and working practices. Your office survey will help you understand what employees need and want from their place of work.

You should also research local property dynamics to understand how demand may affect rents, including the availability of offices to rent, tenant demand and rental values. Look at the local council’s planning and building regulations, the local road network and any proposed redevelopment plans for the area.

Leases and Landlords

When renting a commercial property, you will be asked to sign a legally binding document which sets out the terms and conditions of the tenancy agreement between a landlord and tenant. These agreements are designed to protect both parties and offer stability.

Although lease lengths are typically getting shorter (the average is now around 4.5 years) some can go up to 25 years. Leases have become more flexible with shorter periods of six months now being offered, as well as break clauses which give both sides the option to serve notice without facing a penalty. This can be a wise option if you are uncertain how quickly your business will grow.

However, you will have to agree core terms within the lease. The Royal Institution of Chartered Surveyors (RICS) advises taking particular note of service charges, rent reviews, subletting space, assigning the lease, repairing and decorating obligations and personal guarantees.

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Optimising your office

Studies show that an office environment is really important to creating a happy workforce. Offices without any pictures or other distractions can be ‘toxic’, according to the latest psychological reports. Analysing your current working practices and setting out what is most important to your company will help ensure your team feels engaged and is excited about the impending move.

Ask for their feedback on furniture, storage, desks and meeting rooms to help you understand how much space is required and how it should be allocated. Use this audit to challenge your current IT strategies – are there any new solutions that will help your business? Fundamentally, this study should help you optimise your workspace and decide on the size, shape, floors, amenities and overall costs involved. Make sure you use both hard data (quantitative insight) and soft data (qualitative insight) to inform your decisions. Your fit-out supplier will be able to analyse your results and make recommendations to enhance your new space.

Creating a mixture of spaces can help employees strike the balance between having the privacy to focus on work, and shared spaces which leads to better morale and motivation. Customised departments, communal areas and natural light can all help to make a workforce happy and productive.

Creating an optimised office space isn’t just about interior design, it should incorporate your business strategy, structure, processes, people and reward systems so your brand values come through and contribute to your company’s success. Your new office should reflect the culture you want, not the culture you have.

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Finding a commercial agent

Employing the expertise of a commercial property agent to help locate the right property and negotiate the terms will pay dividends. Once you have selected your preferred location, use the search function from Harness Property to source the right property and agent.

Local agents will come with a wealth of local knowledge about the area you are moving to and undertake the legwork to provide you with a shortlist of options. Finding a commercial property agent will also mean they will take on the tricky negotiation of your lease terms with the landlord.

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Hiring your ‘move squad’

Although your commercial property agent will work to negotiate your lease, it is important to obtain the services of a legal professional. Specialist property lawyers will be well-trained to deal with essential legal work and common pitfalls involved with acquiring or renting commercial property, such as ending a lease early or deciding how the rent should be reviewed. If you are borrowing money to finance your office move, the party providing the funds and your legal advisors will need to comply with the UK Money Laundering Regulations. Ask for evidence in the shape of the supplier’s constitutional documents.

There are other specialist experts well-positioned to help with the more complex elements of renting or buying commercial property. Accurately valuing property is difficult due to the fact that there are not enough transactions to establish a clear market price at any point in time and uniqueness of many buildings.

A professional valuer will estimate a price based on an expert knowledge of the market and the facts at hand, including previous transactions. Appointing a qualified surveyor will help you identify any physical defects in the property and understand the extent of the liability you may be taking on. It is particularly important to commission a thorough survey of the building’s structure, as well as services such as water, ventilation, air conditioning, access, drainage, electrical supplies and security. Understanding these elements at the outset will help negotiate an appropriate lease agreement, especially if you are responsible for rectifying any issues with the building.

You should also hire an experienced fit-out supplier with the knowledge needed to consider the design, IT requirements, facilities management, furniture supply and construction, as well as post-move support. Check that the supplier has the right level of financial stability, an excellent health and safety record and the appropriate insurance cover. They should also be able to provide at least three references you can contact. Finally, make sure they have relevant certifications such as ISO 9001 and ISO 14001.

Other professionals such as an IT specialist, electrical consultant or structural engineer will help you avoid any project pitfalls. Ultimately, accepting the input of this bank of experts will save you time and stress. Going back to your brief will help you decide the full range of external support required for the project.

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Health and safety

Although your fit-out supplier will provide the expertise to ensure requirements are met during the moving process, The Health & Safety at Work Act 1974 requires employers to take reasonably practical precautions to safeguard employees. Undertaking a survey will usually only assess the building’s structure, so it is vital to understand how to identify and avoid any further risks.

Recording risk assessments is a legal requirement if you have five or more employees. The Health and Safety Executive (HSE) provides an online tool which will help you identify and control any issues. There are also standard procedures to undertake before moving in, such as the PAT testing of any electrical equipment. For many businesses, all that is required is a basic series of practical health and safety tasks that protect people from harm. But make sure you stay aware of any changes in legislation that will affect the ongoing running of your office.

In addition, check that your lease agreement includes the appropriate security to keep your employees and your equipment safe. Find out if the building has a security guard, manned entrances and after-hours protection.

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Going green

Having a ‘green’ office has been shown to boost employment productivity levels by 15%. But going green means much more than having plants around your office or recycling paper; it forms a big part of a company’s Corporate Social Responsibility (CSR) programme.

BREEAM lead the way when it comes to the design and assessment for a green building, but sustainability should also form part of the fit-out process. Make sure you look at water and energy consumption, and the long-term energy efficiency of an office space. A building’s Energy Performance Certificate (EPC) will help – generally an A, B or C rating is an acceptable standard. The certificate will also tell you how to lower your carbon footprint and reduce your utility bills.

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Inspecting a building

Once you have finalised your brief and selection criteria with your working group, you will be in a position to view the shortlist of premises drawn-up by your agent. This should include an assessment of the heating, ventilation and air conditioning, as well as any limitations. Collating this information will mean that you will be able to calculate an overall budget and determine how each space might work for your business, such as the number of people each option will take or how the infrastructure can meet your IT needs.

Furthermore, the insight gathered at this stage will help your agent to negotiate appropriate Heads of Terms, so make sure you inspect the properties with both your agent and fit-out partner. Your agent will also be able to draw-up a comparison of the occupation costs for all properties, including rent, rates and service charges.

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Signing a lease

Although your property lawyer and agent will lead on lease negotiations, it is worth understanding the basics of a leasehold agreement before you sign on the dotted line. Some of the common leasehold pitfalls include being liable to repairs due to being tied into an agreement for too long, or taking on an older building which may present greater risks. To avoid these issues, consider restricting your liabilities for repair if you’re agreeing a term of less than 5 years and look at a limited repairing covenant if your building is older.

Retaining flexibility may be important to your business, so check your right to terminate the lease early and whether you can pass the agreements onto a third party. If you need to borrow money to finance your move, make sure that this is in place before contracts are exchanged. Finally, you will have to produce references before consent in principle is given, including a financial reference, two trade references and three years accounts for your business. Once you exchange contracts, you are legally bound by the agreement (apart from Scotland, where you are liable upon completion).

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Communicate, review and improve

Finding the right office space for your company is likely to be one of the most challenging and rewarding processes of your career. Retain your focus by regularly referring to your original brief and accepting that there will be some unexpected issues along the way. Before you move into your new office, make sure your staff are engaged and enthusiastic about the move. Ensure your working group is behind you and get everyone involved in sorting logistics. A removal company should be able to help draft employee instructions.

After you’ve moved, welcome your staff to their new office and celebrate being in your new space. Once your company is settled, appoint a representative from each department to sit on an office committee and ask for feedback on how the office can be further improved. Your fit-out supplier should be able to help with a follow-up assessment and implementing any changes. Finally, give yourself a hard-earned pat on the back for providing your business with the premises it really deserves!

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