De-risking your business through flexible office solutions

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Over the past decade, the co-working industry has seen a meteoric rise across the world. While co-working spaces were initially conceived as a way to cater to the needs of start-ups, and lone-wolf entrepreneurs, over the past few years we’ve seen more SMEs and large companies move into flexible office spaces, even giants such as Microsoft and Facebook. Given this we must ask ourselves, why are companies of different sizes now considering co-working spaces as a viable alternative to more traditional office rentals? 

To understand this, we must examine the key considerations these companies weigh in order to make a decision: how to de-risk over the near and long term, how to capitalize on the opportunity of cost reduction, and how to inject new modes of working into the organization via employee culture changes and networking opportunities.

De-risking through flexibility

Macro-economic conditions and political incidents are major drivers of business risk for an organization. From an operational standpoint, office rent is one of the most significant costs a business incurs, along with labor, especially in Hong Kong which commands some of the highest rental costs in the world. Traditional offices are rigid in structure, with a typical lease lasting anywhere between 3 to 8 years. Unless break clauses are inserted into the contract, the company is locked into the lease for the entire duration of the agreement. To cancel a lease is often expensive, and will create a significant impact on the company’s cashflow and profits. In the cases where a landlord will not allow a lease cancellation, the company then needs to decide to take an accounting provision for the space they will not be using, and potentially have to take additional accounting provisions for any unused fixed assets, or live with having multiple sites.

Traditional offices are rigid in structure, with a typical lease lasting anywhere between 3 to 8 years. While co-working spaces offer shorter term of rental periods, often less than 1 year or even as short as 1 month which provide a high degree of flexibility.

In contrast, co-working spaces can assist businesses in managing their real estate risk by offering shorter term of rental periods, often less than 1 year or even as short as 1 month.  If a business is quickly expanding, the company can simply rent out more space as needed, without having to fracture employees across multiple locations. Likewise, this flexibility allows companies to be more adaptable and fluid to changing goals and systemic economic or political shifts.

Opportunity costs

Co-working also presents some interesting advantages in financial risk associated with daily operations. Traditional offices often need regular renovation in order to keep up with the needs of the company, which in turn requires bank guarantees and deposits that take up a sizable portion of the long term lease costs. These are resources that could be otherwise invested in different aspects of the company in order to grow and expand.

Time is another resource that can be thought of this way: since flexible office space is already outfitted and ready to be used right away, companies save on the resource of time which can instead be invested in other work.

There are many other hidden costs associated with traditional offices that aren’t always considered, such as administrative staff to run the office, cleaning costs, ad-hoc maintenance, management fees, and utility costs, just to name a few. Check out our cost-benefit calculator, which can help companies better understand how these costs all add up.

An area that many people also don’t consider is the cost of space required for meeting rooms. This is effectively ‘dead’ space until it is required for use. In a co-working environment, meeting rooms are available for use as required with meeting room hours allowances for each member, meaning that space isn’t being paid for until it is actually being used.

Networking potential

Business leaders cannot underestimate the power of social interaction and community for helping companies grow. One of the main factors that co-working thrives on is the ability for members to readily connect with a network of like-minded small businesses, which can grow into larger business opportunities. The principle is that people grow together, and that success benefits everyone when the focus is on building opportunities around the needs and priorities of a community.

theDesk - Events
At theDesk, every member matters. We regularly hold business and social events to encourage connections and collaborations among members and neighbors.

Traditional offices are built around the idea of helping managers run their own business, but networks and communities are built outside of the office environment rather than within. Large multi-national companies are seeing the benefits of this and beginning to put employees in co-working spaces to help them expand their network and grow.

Lifestyle perks

The co-working phenomena was built upon the idea that even the smallest company could afford and would benefit from being in an office environment. Being in an office space that has a large variety of people allows for social interaction that would not otherwise be achieved from a home office. On the surface, many co-working companies add lifestyle perks like home-oriented furnishings and non-traditional office amenities, such as table tennis, sofas, and beer taps, which is entirely different from the aim of traditional offices. However, it’s not just a change in presentation, but rather is part of a larger shift towards co-work 2.0 that is aimed at bringing people closer together, which is why this trend has begun to have a ripple effect across the entire office industry.

The future of flexible office solutions

CBRE’s recent Asia-Pacific Occupier Survey uncovered that 64% of MNCs will be using some form of third-party office space by 2020. When we examine the underlying motivations for this shift, it becomes clear that this trend is likely to continue, and even accelerate. As SMEs and MNCs around the world search for ways to lower risk and improve efficiency, the benefits provided by flexible office leasing and co-working are rising as an important alternative for many to traditional office rentals.

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