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Rob Wood

 
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How To Turn Surplus Space into a Revenue Stream

Organisations across a wide variety of sectors, from IT to finance and car manufacturing to retail, can often find themselves stuck for years in long office leases, typically left to steer through market highs and lows with surplus space not being utilised as effectively or efficiently as it could be. While supply and demand can be predicted at times, we are all eminently aware of the difficulties of predicting the long-term trends of the market. Shifting patterns of work have also changed our working habits, meaning many of us regularly work from home or on the road, which can reduce the overall demand for office space and thereby creating surplus space, which is under-utilised or simply left dormant.

However, it doesn’t have to be this way. There are a number of solutions that can make your surplus space more efficient and ultimately turn a cost into a revenue stream. Below are some solutions for you to consider that can achieve this.


1. Develop your own coworking space

Research shows that the average office occupancy rarely goes above 60% on a consistent basis, meaning you are tying up unnecessary assets in frequently redundant space. This occupancy level is impacted by vacations, sickness, team members working from home or with customers and of course variations in employee numbers.

By developing your own coworking space, you reduce the need for fixed desks allocated to individuals, which are often empty.

The coworking space will accommodate team members, only for the times they require workspace. Typically incorporating efficient working solutions such as communal work benches, booths, unallocated desks and a range of creative collaborative solutions.

Flexibility of work styles and variable employee numbers are key here.


2. Sub-lease the space

Of course there is always the option to sublease your space to another organisation.

However, how sure are you about the future and what it will bring. What will you do if the space is required at a later date, when staff numbers grow,

The financial benefit you will gain through a sublease may also be delayed due to negotiated rent free periods. Depending on the length of sub-lease, you may not receive any financial benefit for 1-2 years.


3. Serviced office provider or coworking provider

A third option is to work with one of our growing, serviced office/coworking partners.

We partner with a number of providers globally, who are looking to expand their network across many cities and countries. Quite often surplus corporate space is ideal for this growth.

Fundamentally an agreement is made for the provider to open a new location within your surplus space. This is then marketed under their band name and they remain responsible for achieving high occupancy levels.

There are a number of financial agreements available including a sublease or joint venture, where the profits are shared between the client and the provider. These can quite often achieve an income equivalent to 120% of the revenue you would receive under a straight sublease.

In addition to the financial benefits, such an arrangement further reduces your future risk of surplus space or running out of space as the organisation grows.

There will typically be an agreement in place for your team members to utilise the space on a day-to-day basis and the ability for you to take space back as employee numbers grow, releasing the same again as numbers reduce.


4. Managed Space 

The final option is to release some of your space to be utilised as managed space. What does this mean? We place a larger requirement for one client into your surplus space, for an agreed period of time, after which the space is returned to you.

A managed agreement, provides you with an immediate financial income with the added benefit of being able to plan around an agreed end date. A date, at which time you may wish to utilise the space for your own teams or enter into another managed agreement.


We’ve touched on just a few of the possibilities out there when it comes to surplus space, whether it’s office space or otherwise. The serviced office option provides a strong solution to the problem and with its unique relationships in the market, Offices iQ are very well positioned to help any business dispose of their surplus space and help convert it into a revenue stream. Please contact us on +44 (0) 207 100 2121 or read more here.

In our next article, we will be examining the introduction of the new accountancy rules that come with IFRS-16 and assessing the impact it might have on companies with long real estate leases, illustrating areas that may need to be considered.

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