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The Hidden Costs of Traditional Office Leases (and How Serviced Offices Solve Them)

Times have changed and for most, the likes of rigid working hours and an expectation to be in the office five days a week are a thing of the past. Businesses are beginning to embrace a more flexible approach to working and this major culture shift has removed the need to lease an office space long-term.

The cost of leasing an office space can be pricey, and businesses often fail to take each and every one of those fees into account. We’ve outlined some of the hidden costs of traditional office leases to help determine whether or not there are more cost-effective options available to you.

The hidden costs of traditional office leasing

Traditional office leases harbour a lot of hidden costs that businesses sometimes fail to consider, including the following:

1. Rent, property insurance and service charges

It goes without saying that rent is one of the first major costs that you will incur if you choose to take the traditional office leasing route. In addition to this, you will also be charged for insurance and a service cost that will cover the essential maintenance of the space that you are using.

2. Taxes and registration fees

If you are entering into a lease that extends longer than seven years, it must be registered at the Land Registry. This registration application will incur a small fee of approximately £305.

You may also be required to pay stamp duty land tax to HMRC. This can be confusing, but the HMRC Stamp Duty Land Tax Calculator is there to help determine the amount due.

It’s possible that you will be obligated to pay VAT on your rent, as well as any other payments to your landlord. This isn’t always the case, but if your landlord has opted to tax the premises, then you will be liable to pay VAT. If you are required to pay VAT, this comes at a cost of 20%.

3. Essential office work

Serviced offices are a great option due to their ‘plug and play’ appeal, meaning you can turn up, plug in your equipment and immediately get to work. Traditional office leases are much different, and in addition to everyday equipment, you may also need to source and invest in contractor fees, architect fees and building materials. It’s also possible that you will be required to pay your landlord a premium for their consent to action the work you intend to carry out.

4. Utilities

You’ve likely already accounted for the cost of utilities, but if you haven’t, it’s important to factor in the likes of water bills, electricity bills, gas bills and everything else.

One of the many advantages of taking the serviced office route rather than going down the traditional leasing route is the fact that utilities are included in the cost of your fee to use the office.