Finance For Serviced Office Providers

The serviced office sector has faced considerable challenges following the COVID-19 pandemic and the subsequent shift to remote or hybrid working adopted by a vast majority of UK businesses. As of 2024, the serviced office sector is showing signs of recovery thanks to better suiting the changing needs of UK businesses. Compared to traditional office leases, serviced office providers usually offer:

• Short-term leases for additional flexibility and lesser financial commitment from occupying businesses
• High-speed internet connectivity and essential technology such as printers
• Facilities management services such as cleaning and maintenance

Though the market consists of some large-scale providers like WeWork, most market speculation is around how landlords can enter the serviced office market by converting existing property into serviced office space and leasing it to businesses on a short-term basis. 

Though this grants less financial security than a long-term agreement, the appetite is there and SMEs need access to flexible office facilities to support hybrid work models without committing to the large overheads and long-term commitments of traditional office lets. 

As a property investor, serviced office spaces present many different opportunities depending on your circumstances. From forming and managing your own serviced offices company to converting a building into office space and then either selling or leasing to specialist serviced office providers, there are lots of approaches you may want to take – but all of them require significant capital. 

Finance arranged for serviced office providers includes:

• Asset finance for purchasing technology and equipment
• Loans to fund office fit-outs and conversions
• Cashflow loans to raise working capital when you need it
• Development finance for building new office space or renovating existing buildings
• Commercial mortgages and refinancing to find the most affordable rates and terms

Whatever type of finance you need, we can help you find the appropriate lenders and guide you through the financing process. We know the problems landlords face when applying for finance and can help you maximise the chances of a successful loan for your serviced office project.

Owner-managed versus leasing to a provider

Traditional office lets are struggling in the wake of changes to working models across the entire UK workforce. Businesses are less likely to commit to a long-term office rental and pay the associated overheads when short-term serviced offices are becoming a viable alternative. 

For landlords who own office space, or those interested in converting suitable property into offices, creating a serviced office is a great way to stay relevant to a shifting work environment and ensure you can appeal to businesses of all shapes and sizes. 

Traditionally, the serviced office model was made popular by international brands that lease offices from landlords and then sublet to tenants who may be individual freelancers, small business teams or larger SMEs. This model has been showing signs of difficulty recently, with one of the most famous providers filing for bankruptcy in 2023. 

A more popular model is arising in which owner-landlords create serviced offices and manage the property themselves, leasing space to businesses on flexible arrangements. Growing businesses tend to value flexibility and will pay a premium for it, provided your office has all of the necessary equipment and features demanded by modern companies. 

The costs of running a serviced office business

To be a successful provider, you need to understand and accommodate for the modern business owner. They are balancing employee attitudes around returning to work against the overheads of longer-term office leasing. By presenting them with flexibility and best-in-class facilities, you create a compelling argument for leasing serviced office space rather than committing to a traditional rental. 

Some of the costs you’ll need to consider include:

• Management company fees: to become an owner operator you’ll need to establish a serviced office management company to handle all of the maintenance and cleaning of the property. That means paying all associated costs and also either hiring employees or subcontracting. 
• Utilities: serviced offices typically bundle the cost of utilities into the leasing fee and service charge. With gas and electricity prices still far higher than just a few short years ago, landlords must be mindful of the costs and how they impact profit margins. 
• Flexibility: most businesses are opting for serviced offices due to the flexibility offered not just in terms of space required, but also in lease arrangements. Short-term leases may be less financially secure, but fewer businesses are interested in long-term office rental and a leased unit is preferable to an empty building. If you sign short-term leases, you may need to consider how to raise working capital finance to bridge gaps between tenants. 
• Technology: not all serviced offices provide the same level of technology and equipment, but a relatively minor investment in better outfitting can pay dividends if you win a contract against a competitor because you’ve invested in printers or Wi-Fi boosters. 

The costs above assume you’re already a landlord with an office building ready to get started. If you’re not, you face higher up-front costs depending on your current circumstances. Let’s take a look at how Rangewell can help you with each of them…

Refinancing an office mortgage

If you’re already locked into a financing agreement that is hampering your ability to grow, we can help. Refinancing involves finding another lender willing to purchase your debt and offer a new agreement with better rates or terms – but it can also be used to raise further capital or reduce monthly payments. 

Crucially, refinancing can be used to change the terms of the loan. If your existing lender doesn’t allow you to operate as a serviced office provider, you’ll need to switch to avoid breaching the mortgage conditions. 

Don’t feel locked in to a poor deal. Speak to Rangewell about how refinancing your existing loans can help give you the flexibility and capital you need to successfully launch your serviced office business. 

Finance for buying an office building

You can raise mortgages to purchase commercial property, provided you have a suitable cash deposit dictated by the lender’s LTV. Commercial units tend to expect larger deposits than traditional residential property, as the risk is perceived to be higher. 

However, with the right approach and some refinements to your business plan, you can mitigate some of that risk and more successfully negotiate a deal to suit you. In some cases, you may even take out a different type of loan such as a bridging loan to purchase the property and then refinance into a mortgage. 

Rangewell can help you navigate the property acquisition process and find the right finance product and lender for your needs. See commercial property finance to learn more or get in touch now to get started. 

Finance for office fit-outs for serviced offices

If you own a suitable building and want to get it ready to operate as a serviced office, you’ll need to fund a considerable fit-out project that will transform the fixtures, fittings and even layouts of the property to make it suitable for serviced office use. 

In most cases, this means creating multiple units within a single office floor, allowing you to maximise the amount of tenants within any given building and providing maximum flexibility for tenants who may want to expand as their team grows. 

We can help you raise the right type of finance to fund an office fit-out project, whether that’s a minor update or a significant renovation that involves development work. Speak to our team about office fit-out finance now. 

Development finance for serviced offices

If you intend to develop a building for use as a serviced office, you’ll need funds that cover the entire construction process, as well as the additional costs you’ll need to pay for once construction is completed. 

Property development finance is more complex than traditional loan products. Lenders may be unwilling to fund a project based on your projected development value, instead offering loans based solely on the lower bricks and mortar value. To help you get the best deal, Rangewell can arrange for loans against the GDV with lenders who are willing to support your vision. 

Better finance for serviced office providers

Whatever your situation, Rangewell can help you maximise the value of financing arrangements. We know the lending market inside and out and specialise in property financing in the commercial sector.

We’ll speak to you about your goals for your serviced office and help you find the right finance and lender for your needs – then we’ll negotiate on your behalf and secure the best possible rates and terms to suit your long-term goals.