When comparing a traditional office lease serviced or flex office spaces in the UK, it can be difficult to tell which option represents better value.
The problem is that the prices are often structured differently. A conventional lease might advertise a monthly rent with business rates, service charge and utilities billed separately. An all-inclusive office may combine many of those costs into one monthly fee.
So the useful comparison is not the rent against the all-inclusive fee. It is the total cost of occupying the office.
- Business rates vs all-inclusive office fees: what you’re really comparing
- What does each option include?
- When does each option work out cheaper?
- Where VAT and other costs can change the calculation
- Compare the total occupancy cost with Hubble
Business rates vs all-inclusive office fees: what you’re really comparing
Business rates are a charge on most non-domestic properties, including offices. The amount payable is based on the property’s rateable value and the applicable business-rates multiplier, with reliefs potentially affecting the final bill.
With a traditional lease, the occupier will typically need to account for business rates separately from the rent. With a serviced or flex office, the operator may include business rates within the quoted office fee.
The difference matters because a lower headline rent does not necessarily mean a lower overall cost.
| Cost | Traditional lease | All-inclusive office |
|---|---|---|
| Rent | Charged separately | Included in the headline fee |
| Business rates | Usually separate | Typically included |
| Service charge | Often separate | Usually included or specified |
| Utilities | Often separate | Often included |
| Other office services | Usually separate | May be included, depending on the package |
| VAT | Depends on the landlord and property | Depends on the operator and arrangement |
The exact inclusions will always depend on the agreement, so an “all-inclusive” label should be treated as a starting point rather than a guarantee that every cost is covered.
For example, Hubble listings can state that all business rates and bills are included in the price shown. This illustrates how an all-inclusive office can present several occupation costs as one figure rather than separate charges.
What does each option include?
The way office space is arranged has a direct bearing on how businesses pay for it. A conventional lease, a serviced office and a shared workspace can all offer very different approaches to rent, running costs and the level of commitment involved. For smaller businesses in particular, understanding these differences is an important part of choosing a workspace that fits both their needs and their budget. We’ve explored the options in more detail in our guide to office space for small businesses.
Traditional lease plus business rates
There are several ways for businesses to secure office space, from taking on a traditional lease to choosing a flexible or shared workspace. The right option will depend on factors such as business size, budget and how much flexibility is needed. Our guide to office space for small businesses explores the differences between leased, flexible and shared offices.
A traditional lease usually separates the main costs of occupation.
You may have a quoted rent, with business rates, service charge, utilities, insurance and other building costs sitting alongside it. Some of these costs may be fixed while others can vary over time.
This structure can give occupiers more control over individual costs, but it also means the advertised rent does not necessarily represent the full monthly cost.
To make a fair comparison, add the recurring costs that sit outside the rent. The relevant business-rates liability will depend on the property and the arrangement in place.
All-inclusive serviced or flex fee
All-inclusive serviced offices or flex offices take a different approach. Rather than charging separately for every element of occupation, the operator combines specified costs into one fee.
Depending on the agreement, this can include business rates, utilities, cleaning, internet, furniture and other services.
The benefit is straightforward budgeting. Instead of calculating several separate monthly charges, an occupier has a clearer view of what the workspace will cost.
But it is important to check exactly what is included. Meeting rooms, additional services, deposits, one-off charges and other extras may sit outside the advertised fee.
When does each option work out cheaper?
There is no universal answer. The outcome depends on the property, the terms negotiated and the costs included in each arrangement.
A traditional lease may have a lower total cost where the rent is competitive and the occupier has relatively low additional costs. It can also make sense for businesses that value a longer-term commitment and greater control over their premises.
An important consideration when comparing office costs is how much space your business actually needs. In a hybrid working environment, not every employee will need a desk every day, so getting the balance right can have a significant impact on occupancy costs. Our guide to desk-to-employee ratios explains how to calculate the right ratio for your business and make better use of your office space.
The best way to compare the two is to calculate the total occupancy cost over the same period.
For a traditional lease, add: Rent + business rates + service charge + utilities + other recurring costs
For an all-inclusive office, start with: All-inclusive fee + anything explicitly excluded from the package
Then compare the two on the same VAT basis.
Where VAT and other costs can change the calculation
VAT is another factor to consider when comparing office costs.
Depending on the property and the landlord or operator’s VAT position, VAT may apply to rent, service charges or an all-inclusive office fee. This means two prices that initially appear comparable may produce different totals once VAT is taken into account.
It’s worth noting that short-term and serviced arrangements are usually standard-rated for VAT regardless of the exemption status of the building they operate it. This means that VAT is a more or less certain cost to keep in mind with flex office options.
The safest approach is to establish whether each quoted price is inclusive or exclusive of VAT and compare like with like. VAT treatment can depend on the specific arrangement, so it should be confirmed before making a financial decision.
It is also worth checking for costs that do not appear in the headline price. On a traditional lease, these could include service charges, utilities or other building costs. On an all-inclusive agreement, check whether there are limits, exclusions or separately charged services.
Compare the total occupancy cost with Hubble
The most useful figure when comparing office options is not the advertised rent. It is the total cost of occupying the space.
A traditional lease may look cheaper until business rates, service charge and other costs are added. An all-inclusive office may have a higher headline fee but include costs that would otherwise be billed separately.
Once you know what you need to account for, you can start comparing office spaces in the UK on a like-for-like basis. Hubble’s listings make it easy to compare available offices, locations, sizes and pricing, while our free advisor service can help if you want support finding suitable options.
Whichever route you take, the same principle applies: look beyond the headline price and establish exactly what you are paying for.
