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The Intangible Cost of Renting a Serviced Office
Melbourne Managed Offices

What is the methodology adopted by most companies to calculate their real, total cost of rental (TCR) when choosing a service office provider? It is a competitive industry and one that offers great variety of choice for the customer. Every successful serviced office provider seeks to find a unique selling point(s) to differentiate their offering from the competition. Some get it right and others fail miserably. But we suspect that there is far greater error on the part of the customer when choosing the best serviced office provider – and here is why…

No business comes down to just dollars and cents. Price, margins and performance are tangibles that don’t determine a company’s final, net fiscal performance. It is the intangibles with the tangibles that determine this final outcome, including factors such as customer loyalty, cost of sale from recurring sales with up-sell and cross sell opportunities, staff retention, customer/staff relationships, market perceptions, product/service quality, innovation, etc.

So why do so many companies bring the majority of their selection criteria for a serviced office down to the cost? And this is a cost that isn’t even a true reflection of real, total cost. The latter makes it even more puzzling than if they at least got their calculations of the tangible cost correct.

If you consider some of the intangible performance criteria listed above, then surely it doesn’t make sense to choose a serviced office provider, where the image, staffing and performance don’t match up to any of these intangibles. Here are some examples:

  • Staff in uniforms – do you put your office staff in uniforms at your own offices? What message are you conveying when all the staff walk about in uniforms. This suggests a robotic nature, lack of freedom of thought or creativity.
  • Branding of the serviced office – what is the message you are conveying if it is the serviced office’s brand you are effectively promoting, rather than your own? So surely it is preferable to choose an office that most visitors would conceive to be exclusively your own, rather than being in a serviced office?
  • Office design and look & feel – the vast majority of serviced offices have been designed and built to meet the lowest common denominator on the scale of conservatism; much like the old days where businessmen wore suits and ties, with only white shirts. It took the brave hearted to branch out into wearing colourful, patterned shirts, then to open neck shirts with jackets. Nowadays the majority of business people don’t bother much about their attire. So why choose an office that is still sticking to the formula of “one can never be overdressed”, when we have all gradually adapted to going to work in casual dress? Why choose an office that is drab, furnishes in greys and browns, lacking of all style, no edginess, nothing innovative or unique?
    Is this what your business wishes to convey to your own customers?
    So why choose an office that ticks all the boxes for being boring, conservative and lacking all innovation?
  • Customer retention – every business wants to hold onto their customers as it is arguably the biggest asset of any company. Our average term for tenants is over 7 years. We even have tenants who have been with us since the late 90’s! So besides the fact that we are obviously doing something very well (to achieve this retention rate), it also means that we are offering our tenants stability, quality of customer service and performance in every way possible. This in turn gets passed on by our tenants to their own customers. It allows our tenants to have our stable staff get to know tenant’s customers, build relationships on their behalf, offer tenant’s staff an enjoyable working environment so that they want to stay working for our tenants and on it goes, so that down the line the baton gets passed.
    Our biggest competitor loses 70% of their tenants within 12 months. Compare that with our average stay of >7 years. Does one need to go much further than ask just the one question, why?

Note that I have not touched on the subject of the real, total financial cost of renting an office. We will address that in a subsequent posting.

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