Serviced Offices - Making sense for new companies

Serviced Offices - Making sense for new companiesImage Credit: Supplied

Small organisations, multinationals setting up a local branch and firms that need to execute a short-term project will find serviced offices an attractive solution for their office space requirements. According to Lachlan Buchanan, Development Director at Servcorp, which provides serviced and virtual office solutions, serviced offices have been popular in Dubai since the 1990s. Buchanan says start-ups, entrepreneurs and even Fortune 500 companies have availed of serviced offices because of the flexible leasing terms and low cost.

''Dubai continues to mature as the market is more knowledgeable about the product and what different operators can offer,'' says Buchanan. He notes that in more prominent cities such as London and New York, around 3 per cent of office space is serviced, and he believes Dubai is moving in this direction. ''Dubai will continue to grow as it cements its status as a global hub.''

Most commercial spaces available in Dubai are shell and core, which require significant investment to fit-out, according to Sanjay Chimnani, Managing Director of Raine & Horne Dubai. ''New businesses would not want that because it is not only time consuming but also expensive [to fit it out], especially if the office is needed for a short period.''

The value-added services bundled with serviced solutions make them much more attractive to new tenants. ''Every business needs a licence and a serviced office operator can assist clients in [acquiring a] license,'' says Chimnani, pointing out that it is only in the UAE where an operator can assist a client in applying for a business licence. ''[It] saves a lot of effort for a start-up and [accordingly this creates] a slightly bigger market for serviced offices in Dubai than in the rest of the world.''

Chimnani says demand to spike in the last 18 months to the World Expo 2020, as he expects many new companies to open in Dubai.

''This will boost demand for serviced offices because new companies from the UK, US, Indian subcontinent and other parts of the world will initially look for ready-to-move-in commercial spaces.''

Chimnani, however, points out that the serviced office segment has been very competitive over the past 18 months because of an oversupply in traditional office spaces in areas such as Business Bay and Jumeirah Lakes Towers (JLT). ''However, when occupancy level rises, we will see the serviced offices to become a more viable choice for the new firms,'' says Chimnani.

Despite the competition, Sandrine Loureiro, Head of Commercial Sales and Leasing at Better Homes, believes there will be a steady influx of new companies setting up operations in Dubai to maintain the demand for serviced offices. ''The sector has grown tremendously in the past few years,'' he says. ''The costs associated with a serviced office work for small companies because of the convenience to companies that are new to Dubai, since everything is ready to use such as furniture, fast internet, stationery, etc.''

He adds: ''There is basic rent, security deposit based on one-month rent and activation fee, plus a range of optional additional service packages that are available as per the firm’s requirements. The renewal period for yearly tenants may be limited – between two and four years – by location and activity.''

Businesses can hire a serviced office in varied areas in the city. In JLT, serviced offices at Almas Tower rent out for Dh6,700 per month, while it is around Dh5,400 in Al Habtoor Business Tower in Dubai Marina.

In Downtown Dubai, rent for a unit at Boulevard Plaza is around Dh6,000 per month and it goes up to Dh8,000 in Emirates Tower on Shaikh Zayed Road.

While it has its advantages, ready-to-use offices may not suit every business need, but its and growing number of configurations will continue to attract tenants, says Gary Walsh, Commercial Manager at Exclusive Links Real Estate Brokers. He says firms that expect fluctuation in their business performance over the next five years should consider serviced office options.

''Apart from having the ability to walk in and have a ready office immediately, firms also benefit from llinclusive cost, payable either monthly or annually,'' says Walsh. ''This will include office space, reception and waiting area, front desk services, air conditioning, electricity, water and maintenance, high-speed internet connection, printing and fax, kitchen, coffee delivery and refreshment facilities, inclusive of office boy services, and other services they opt to choose such as meeting and conference rooms.

''Here the firm has immediate resources of staff and facilities available and connection to the business world as part of an established business setup.''

The key here is that it is a flexible solution without a long-term commitment, says Walsh. However, the companies that grow rapidly may be limited by the space and services offered by the provider.

Matthew Green, Head of Research and Consulting at CBRE Middle East, says serviced offices, specifically those from larger international operators, also offer global membership packages, which enable firms to use serviced offices in other countries.

''Companies often utilise this model as a stepping stone when they enter the market, prior to committing to a longer-term traditional lease and higher upfront capital expenditure for the fit-out,'' says Green.

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Source: Hina Navin, Special to Property WeeklyPW


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