Traditional Lease vs. Serviced Offices: A Heritage Workspace Case Study
The decision between offering a traditional lease or converting a property into a serviced office can significantly impact occupancy rates, revenue potential, and long-term investment returns. This case study explores two similar Georgian properties in Tamworth, one converted into a serviced office and the other marketed under a traditional lease model. By comparing their outcomes, we highlight the advantages of flexible workspaces and the challenges associated with conventional leasing.
The Opportunity
When we started Heritage Workspace, one of my first appointments was 11 Aldergate in Tamworth, a 4,000 sq. ft. Georgian townhouse previously owned and tenanted by a local solicitors' firm. The building’s new owner, our client, purchased it in January 2024. Due to commitments on other projects, we were approached to explore the potential of converting it into a serviced office space.
11 Aldergate was well positioned in the town centre, making it an attractive location for businesses. Additionally, its existing layout, divided into well sized rooms suitable for teams ranging from two to ten desks, made it a strong candidate for a serviced office conversion.
We developed a phased approach to the conversion, ensuring minimal upfront expenditure while allowing for organic occupancy growth. A new co-working lounge was introduced, communal facilities were improved, and a flexible pricing model was introduced to attract a range of business types.
Months after launching in September 2024, demand confirmed the decision. With local interest and secured pre-lettings, 11 Aldergate changed from an empty space to a busy multi-tenant business hub, which now sits at over 80% and generating above net market rent.
The Comparison Property
At a similar time to my client purchasing 11 Aldergate, a similar Georgian property was also acquired by a different investor. This building is smaller in footprint but has many of the same positive characteristics, such as being in the heart of the town centre, previously owned and tenanted by a solicitors' firm, and featuring multiple rooms that can fit between three and six desks.
The appointed agent on this opportunity is very well respected locally and was initially instructed to look for tenants on either a whole-building or floor-by-floor basis under more traditional lease terms.
However, the floor-by-floor approach for the other Georgian townhouse ran into challenges due to the layout of the building having limited facilities, making the outlay to build additional infrastructure unviable. The current stance is to let the building to a single occupier on a long-term traditional lease.
This building remains empty. In the same time that the flexible, serviced office approach has managed to fill 11 Aldergate, generate a profit, and become established as a self-sufficient business centre whilst the traditional lease model is still on the market in it’s entirety.
Limitations of the Traditional Lease Model
Historically, buildings that had been let under a traditional lease to a single occupier provided a long-term, stable income stream for the owner. However, it also came with challenges:
Lengthy Vacancy Periods: When the solicitors vacated, the landlord faced a potentially long search for a new tenant, given the need for a company willing to take on a long-term lease.
Significant Fit-Out Costs: A new tenant would likely require modifications to the space, with costs typically borne by the landlord.
Limited Market Appeal: Many small and growing businesses prefer flexibility over multi-year lease commitments, reducing the pool of potential tenants.
The Case for Serviced Offices
By converting 11 Aldergate into a serviced office space, we could address these challenges while unlocking new revenue opportunities:
Increased Occupancy Potential: Rather than waiting for a single long-term tenant, the building could accommodate multiple businesses with shorter, more flexible agreements.
Higher Revenue Per Sq. Ft.: Serviced offices typically command a higher price per square foot compared to conventional leases, increasing overall yield.
Plug-and-Play Appeal: Providing fully furnished, ready-to-use office spaces makes the offering attractive to start-ups, freelancers, and SMEs looking for hassle-free workspaces.
Ongoing Management and Community Benefits: A well-managed serviced office fosters a collaborative environment, enhancing tenant retention and referrals.
This case study illustrates how repositioning a traditional leased property into a serviced office can significantly enhance flexibility, revenue potential, and long-term sustainability. For landlords seeking to maximize returns while mitigating vacancy risks, serviced offices present a compelling alternative to conventional leases.
Have a vacant Property in need of repurposing? Get in touch for a free consultation.
Related Blog Articles
As urban and regional landscapes change, the need for innovative solutions to accommodate small businesses has become increasingly important.