Judging your options based on a simple equation of price divided by square feet when looking for office space is an easy trap to fall into. Any business owner knows the cost of the square footage for their office space is only one line item in their office space overhead. Before you jump to a financial conclusion you might regret, take a step back – What really makes up the total cost of occupancy? How do shared office spaces reduce the total overhead for a company?
To start our analysis, let’s first look at base rent. When a landlord gives you a square footage, it is based on Rentable Square Feet (RSF). In most simple terms, RSF is the space that is your office plus a shared portion of common areas such as hallways, elevators, building lobby, bathrooms, etc. This is called the “load factor”. So 300 square feet really isn’t 300 square feet. For shared office spaces, the price per square foot will always be higher for two reasons;
First, the “load factor” is higher than a traditional office space because it also includes a full furnished office infrastructure: conference rooms, reception area, copy room, and a break room or a business lounge. While these are common spaces not typically part of a traditional space, they are also spaces which a company typically needs to provide, one way or another, for themselves. Thus you get the same amenities for a lower overall square footage.
The second reason is that rent in a shared office space environment provides more for a business than four walls, a floor, and a ceiling. Your monthly check to a business center operator encompasses your full infrastructure cost, not just your cost for space.
Required Infrastructure Cost
The reduction in infrastructure cost is where companies can really leverage cost savings through the shared infrastructure in a business center. Having an office has costs associated with it past the cost for the physical space. Furniture, phone sets, long distance, high speed internet connection, photocopier, photocopier maintenance contracts, utilities, janitorial, maintenance of the space – the list is far too extensive to list in full detail.
Each of these items have hard costs associated with them, and they are not things that you can cut corners on. Sure, we all have cell phones to use instead of hard lines. The honest truth is that there may be a handful of things, such as long distance, that can be “worked around”, but the overall cost of providing these services yourself compared to leveraging shared cost will end up being more expensive in the long run. The power of a shared infrastructure is in bundling all of your costs together with other companies and paying a prorated portion for a lower total price.
“Optional” Infrastructure – Does it need to be “Optional”?
For many new satellite offices of larger companies and nearly all start ups, many standard office features are deemed optional, putting the burden on the people who work in the office. The most common example of this happening is with reception/admin services. A receptionist costs money – salary, benefits, sick leave, and training. With these services included as part of a shared office space, they don’t need to be optional because the incremental cost to a company is very low.
Contrasted with the benefit of highly skilled and higher paid employees being more productive because they are not spending their time on administrative tasks. Not only does a company gain services they may have tried to do without, their hard labor costs are focused more effectively for an overall cost savings to the company.
Total Cost Of Occupancy
Grasping this reality is intuitive – leveraging shared costs produces a lower total cost. Below we have included a line item breakdown based on studies of a typical office set up compared to a shared office setup. Even setting aside the fact that a company can completely eliminate $90K in capital costs, the total annual cost is 40% less than traditional office space.
While this breakdown is based on hard data, feel free to contact any of our local managers for a breakdown using your specific costs and options to gauge if a shared office solution or another solution is the best fit for your needs. If shared office space isn’t the best fit for your particular needs, we are more than happy to share our insider knowledge to help you find the best fit for your company.
Currently serves as a Marketing Manager with a focus in online marketing and market strategy. Prior to joining Pacific Business Centers (rebranded as Pacific Workplaces), Nick consulted with small businesses to assist in a business development and public relations role.