HR & Management

How to avoid the ‘black hole’ of hidden office costs

4 min read

29 April 2014

Office costs aren't just your rent, business rates and facilities management – there are a whole lot of extra, hidden costs. Here is how to avoid falling into the black hole of hidden office costs.

Understanding the true cost of commercial property can be complex. To ensure the success of an office move or re-location, business owners must source and consider information on costs from a multitude of sources, both external and from within their own organisations. 

While some expenses such as rent, rates, facilities management (FM), IT & telephony infrastructure, dilapidation and legal fees can be readily identified, others are more elusive.

According to property consultants Actium Consult, the headline figure of rent represents just 35 per cent of total office expenditure – and it is those hidden or forgotten costs that have the potential to create a long-term drain on an organisation’s future finances. 

Unfortunately, many of these figures are difficult to obtain, or simply unknown. Here are just a few of the office costs that business owners rarely take into account:

  • The cost of overruns, and delays including the “opportunity cost” of missed market opportunities
  • Management time of senior executives
  • Legal costs associated with the lease
  • Maintenance contracts – building, plant and machinery, ground maintenance, day to day (for example carpet cleaning), technology hardware
  • The cost of unused space once the operation is up and running
  • Future upgrades – upsizing, downsizing 
  • Legislation changes, health and safety regulations, technology advances
  • Cost of getting things wrong – such as employee numbers, business forecasts, installing the wrong equipment

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To mitigate this risk, other solutions as alternatives to purchasing or leasing are now emerging, such as managed office solutions (MOS) that deliver a combination of benefits not available with traditional solutions. 

For example, they are typically offered on a fixed-price, fully-managed contract basis; they include all the fit-out and furniture; they don’t require any capital outlay, they offer all the IT and communications infrastructure required to run a business and there are no exit penalties to pay at term. 

The result is that business operators can achieve true total cost clarity for their entire property contract throughout its duration. At the same time they can also mitigate the associated risk of property and its supporting infrastructure. 

Key benefits of MOS:

  • Ensuring complete cost-clarity throughout the term of their property contract with no capital outlay and on a fixed-price basis
  • Reducing the risk of having the wrong property in the wrong place at the wrong time by aligning their property contracts to foreseeable business planning horizons 
  • Being contractually guaranteed to have property delivered on-time, on-budget and fit for purpose 
  • Offering stringent Service Level Agreements (SLAs) to ensure ‘peace of mind’ of business continuity throughout the contract period without any future capital outlays
  • Eliminating depreciation and obsolescence on technology
  • Providing a clean exit at term – with no dilapidations, lease overhangs, or legal fees to pay

Increasingly organisations are trying to arrive at a workstation cost that includes all property and supporting infrastructure and have a full understanding of all the costs in providing an efficient working environment for their employees. 

By adopting a managed approach to property and engaging in a professional partnership with a specialist MOS supplier, organisations can achieve this goal and at the same time avoid incurring a multitude of hidden or unknown property costs. 

By choosing an alternative office solution to leasing or purchase, responsibility and risk can be delegated to a third party, costs are lowered and management time is liberated.

Directors can then spend time on what they do best: manage their business!

John Gotley is managing director at occupier solutions business Portal.