Flex, sublease or your own lease: which one at 5 to 25 people?

Three products, not three prices

Tenants compare a desk rate against a rent per square metre and conclude the serviced office is dear. The comparison is wrong before it starts. A flexible desk rate is a finished, running office. A rent per square metre is an empty floor, before outgoings, before the fitout, before a single cable is run. A sublease sits between the two: the space is usually fitted and furnished by the tenant who is leaving it, so you get most of the finished office at a rent that is often below market, in exchange for taking on their term and their landlord.

So the honest comparison is total cash out over the time you will actually be there, including what you have to spend to get in and what you are obliged to spend to get out.

Five to ten people: flexible, almost every time

At this size a direct lease of an efficient floor barely exists, and where it does the fitout, the bank guarantee and the make-good are spread over too few desks to make sense. A sublease can work if a departing tenant has a fitted pod of the right size, but they are rare at this scale and the term is whatever is left on someone else's lease.

The flexible office wins on cost once everything is counted, and it wins more decisively on risk: headcount at this stage moves faster than any lease can. Take the flexible option, and spend the effort on getting the desk rate right. Our pricing guides show what serviced desks actually go for by city and team size, with sample sizes.

Ten to twenty-five people: the decision that matters

This is the band where all three options are live and the wrong call is expensive either way. The question to answer first is not price. It is: how confident am I about the next three to five years?

If the answer is very confident, a direct lease starts to earn its keep somewhere around twenty people, particularly on a fitted or spec suite where there is no fitout to fund, and the incentive on offer can be taken as rent-free rather than spent on a fitout. Below about fifteen the arithmetic rarely closes.

If the answer is honestly uncertain, a sublease is the middle path: your own front door and a fitted office at a discount, on a term you did not have to negotiate. Its weakness is the end date, which is set by the outgoing tenant's lease and can be two years away, and its dependence on a landlord who has not chosen you.

If the answer is no idea, stay flexible. The premium you pay for a month-to-month desk is the price of not being wrong, and at this size it is usually cheaper than a lease you have to get out of.

What each one costs you beyond the rent

Flexible office. Meeting room hours above the allowance, printing, extra internet, and rate rises on renewal, which are routine. Read the inclusions before you sign.

Sublease. A share of outgoings if the head lease is net, the head tenant's make-good passed down to you in the sublease, and the cost of moving again when the head lease ends. Get the head lease and read the make-good clause.

Direct lease. The fitout, the bank guarantee sitting idle for the term, outgoings, and the make-good at the end, which is agreed at signing, paid years later and routinely underestimated. The incentive is real money, but it is the landlord funding your commitment, not a discount.

How to run the numbers

Pick the period you are confident of, usually two or three years, and cost all three over it: monthly fee or rent, outgoings, the up-front cash, the meeting and service extras, and the exit cost. Divide by the desks you will actually fill, not the desks the floor holds. The option with the lowest cost per occupied desk over your confident period is the answer, and it is rarely the one with the lowest headline rate.

The office cost calculator does this arithmetic for a serviced office against a lease. For live market figures use the rent benchmark, which carries sample sizes rather than estimates.