The Hidden Costs of Office Space - What to Watch Out For

When businesses start an office search, they typically focus on the monthly rent or per-desk cost. But the headline figure is rarely the full picture. There are a number of additional costs - some obvious, some less so - that can add significantly to your total outgoings. Here is what to watch out for.

Business rates

Business rates are a property tax charged by local councils and apply to most commercial premises. In a serviced office they are typically included in your all-inclusive fee, but in a leased office they are a separate and significant cost on top of your rent. Business rates vary depending on the rateable value of the property and your location. For a leased office in Central London, rates can add roughly 30 percent to your headline rent.

Service charges

On a leased office, the service charge covers the costs of maintaining and managing the building - cleaning, security, maintenance of common areas and building management. Service charges are typically quoted per square foot per year and can add £10 to £30 per square foot to your costs depending on the building.

Fit-out costs

If you are taking a shell and core or unfit leased space, the cost of fitting it out to a workable standard can be substantial. For a basic fit-out you should budget at least £50 to £80 per square foot - for a high specification fit-out, £150 per square foot or more. On a 2,000 square foot office that is a significant upfront investment.

Dilapidations

At the end of a lease, tenants are typically required to return the space to its original condition. This is known as a dilapidations liability and can run to tens of thousands of pounds depending on the extent of fit-out works carried out during the tenancy. It is a cost that is easy to forget about at the start of a lease but very real at the end.

Rates relief and incentives

The flip side is that there are often incentives available - rent-free periods, fit-out contributions and rates relief for eligible businesses. Smaller businesses may qualify for Small Business Rate Relief, which can reduce or eliminate your rates liability entirely. A good broker will make sure you are aware of and benefit from any available incentives.

How to protect yourself

The best protection against hidden costs is thorough due diligence before signing anything. Make sure you understand exactly what is and is not included in any agreement, get independent advice on the total cost of occupancy and never rely solely on the headline figure.

At Scope Office Search we provide honest, transparent advice on the total cost of any office deal and make sure our clients never face unexpected costs. Our service is completely free - get in touch today.