# Cost Certainty – The SME Business Owner’s Guide to Property Expansion
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2019-01-11
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: How SMEs Can Alleviate Capex Obligations When Relocating
Meta Description: Phil Sugden, director at flexible workspace solutions provider, Portal Group, discusses solutions for SMEs to manage office relocation costs, especially in
URL: https://financedigest.com/cost-certainty-sme-business-owners-guide-property-expansionhtml

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**_Phil Sugden, director at flexible workspace solutions provider, Portal Group, discusses how rapidly growing SMEs can alleviate the extensive capex obligations incurred when relocating offices._**

For both small and large businesses alike, an office move can be an incredibly daunting and time-consuming process.

The start of a brand new year offers businesses a crucial opportunity to attract new talent. January is not only a peak time for prospective employees to begin looking for their next career move, but also a key time for growing SMEs to consider relocating their workspaces to larger premises due to growth [\[i\]](#_edn1).

However, the uncertainty of the [current market](https://www.financedigest.com/pharmaceutical-contract-packaging-market-current-impact-to-make-big-changes-2020.html "Pharmaceutical Contract Packaging Market Current Impact to Make Big Changes 2020") conditions, and of course Brexit, means that UK-based SMEs are now required to adapt their operations to become more flexible than ever before.

The fixed terms and extensive lease lengths associated with the conventional leasing model can present significant challenges for smaller businesses experiencing [rapid growth](https://www.financedigest.com/tissue-diagnostics-market-set-for-rapid-growth-by-2030.html "Tissue Diagnostics Market Set for Rapid Growth by 2030").

While growth is one of the most esteemed characteristics of any successful organisation, research has found that 78% of SMEs actually delay moving offices due to the stress associated with property acquisition [\[ii\]](#_edn2).

Despite this, property expansion is a fundamental phase for SMEs. Relocating to larger premises allows [businesses to meet fluctuating demands](https://www.financedigest.com/how-can-businesses-digitalise-supply-chains-to-meet-demand.html "How can businesses digitalise supply chains to meet demand?"), while also facilitating the introduction of a larger workforce.

Property acquisition is commonly considered to be one of the most costly financial investments a [small business](https://www.financedigest.com/government-assisted-financing-schemes-for-small-businesses.html "Government Assisted Financing Schemes For Small Businesses") can encounter. Under a traditional lease, [business owners](https://www.financedigest.com/carbon-zero-what-it-means-for-business-owners.html "Carbon Zero: What it Means for Business Owners") must consider an array of different expenses, including fit out and facilities management at the start of a new lease, and dilapidations and exit fees at the end of their current lease.

Unpredictable [fees can have a seriously negative impact on businesses](https://www.financedigest.com/how-to-budget-for-legal-fees-in-your-business.html "How to Budget for Legal Fees in Your Business"), forcing even the most well-established businesses to reassess their budgets. With various different costs incurred throughout the process, [forecasted budgets](https://www.financedigest.com/how-financial-planning-starts-with-a-new-approach-to-budgeting-and-forecasting.html "How financial planning starts with a new approach to budgeting and forecasting") can easily be exceeded due to delays, oversights and issues emerging unexpectedly.

This, in addition to the time-consuming process of acquiring the multiple formal approvals required for revising budgets, can have a detrimental effect on output and productivity.

In comparison to other areas of the business, [property acquisition under the traditional office](https://www.financedigest.com/analysis-u-s-companies-spend-billions-on-stay-at-home-tech-boding-ill-for-office-properties.html "Analysis-U.S. companies spend billions on stay-at-home tech, boding ill for office properties") lease presents a substantial capex obligation, and the cost is not always guaranteed if the project is managed incorrectly.

As a result, SMEs today are far less attracted to the financial burden of a lengthy traditional lease, and instead far more attracted to contemporary workspace contracts that can facilitate their [future growth strategies](https://www.financedigest.com/poly-p-phenylene-2-6-benzobisoxazole-pbo-market-future-innovation-strategies-growth-profit-analysis-forecast-by-2029.html "Poly-p-phenylene-2, 6-benzobisoxazole (PBO) Market: Future Innovation Strategies, Growth & Profit Analysis, Forecast By 2029").

Small to medium sized businesses are now viewing their office space requirements as a strategic component of their [business plan](https://www.financedigest.com/hyperspectral-imaging-system-market-know-latest-trends-forecast-for-long-term-business-planning-up-to-2026.html "Hyperspectral Imaging System Market – Know Latest Trends & Forecast for Long-term Business Planning up to 2026"), and thus opting for more flexible leasing options at a fixed price, with no additional costs.

In the UK today, the vast majority of traditional office leases require a commitment for a 10-15 year [fixed term](https://www.financedigest.com/ifrs-15-moving-away-from-short-term-fixes-is-vital-for-effective-compliance.html "IFRS 15: Moving away from short-term fixes is vital for effective compliance"). For SMEs growing in a rapidly evolving market place, this can [limit future business developments and changes](https://www.financedigest.com/lane-change-assist-systems-market-overview-business-growth-development-factors-application-and-future-prospects.html "Lane Change Assist Systems Market Overview – Business Growth, Development Factors, Application And Future Prospects") to working culture.

The contract lengths for managed office options, however, typically range from 3-5 years. This enables companies that require a high number of workstations, to closely align their accommodation requirements with their actual [business needs](https://www.financedigest.com/pstn-isdn-switch-off-what-businesses-need-to-know.html "PSTN/ISDN switch-off: what businesses need to know "), allowing them to expand or downsize as required.

The first step of the [property expansion process is sourcing](https://www.financedigest.com/exclusive-china-regulator-launches-new-probe-into-banks-property-loan-exposure-sources.html "Exclusive-China regulator launches new probe into banks’ property loan exposure – sources") a suitable building and location. Under the traditional office lease, businesses are required to self-source their chosen property. [Packaged offerings will undertake a bespoke property search which closely aligns with business](https://www.financedigest.com/factbox-reaction-to-uks-energy-support-package-for-businesses.html "Factbox-Reaction to UK’s energy support package for businesses") requirements, in addition to handling the entire project management, which will be combined into a single cost.

Once a suitable property has been selected, the terms of the contract can then be negotiated. This is a crucial time for SMEs to reflect on their [growth strategy and meticulously forecast](https://www.financedigest.com/camphor-market-in-depth-analysis-growth-strategies-and-comprehensive-forecast-to-2030.html "Camphor Market In-Depth Analysis, Growth Strategies and Comprehensive Forecast to 2030Camphor Market In-Depth Analysis, Growth Strategies and Comprehensive Forecast to 2030") for how their property requirements could change over the given time period.

Once negotiations have completed, SMEs relocating under the traditional lease should begin the process of relocating their IT and telephony infrastructure. This is a critical part of the relocation process, and one of the biggest causes of reductions in [productivity if not managed](https://www.financedigest.com/geometric-progression-based-on-digitization-to-be-witnessed-by-reproductive-management-products-market.html "Geometric Progression based on Digitization to be witnessed by Reproductive Management Products Market") correctly. [Managed office models integrate](https://www.financedigest.com/power-management-integrated-circuit-pmic-market-research-report-2022-global-forecast-till-2028.html "Power Management Integrated Circuit (PMIC) Market Research Report 2022 – Global Forecast till 2028") the IT move into the project, minimising business interruption and downtime.

One of the final stages of the expansion process is fitting out the new workspace. [SMEs should carefully consider the time](https://www.financedigest.com/no-time-to-procrastinate-for-smes.html "No Time to Procrastinate for SMEs"), resource and costs associated with designing and branding their new office. If opting for a conventional lease, this will need to be outsourced, in addition to [sourcing the furniture and managing](https://www.financedigest.com/activist-investor-elliott-management-takes-stake-in-salesforce-sources.html "Activist investor Elliott Management takes stake in Salesforce -sources") the utilities, which can present a substantial additional expenditure

[Businesses are also highly restricted on how they can utilise their office](https://www.financedigest.com/are-businesses-using-cybersecurity-as-a-scapegoat-for-a-desperate-return-to-office-working.html "Are Businesses Using Cybersecurity As A Scapegoat For A Desperate Return To Office Working?") space to reflect their brand and organisational culture. With [flexible managed office models](https://www.financedigest.com/the-future-of-payments-flexibility-regulation-and-bespoke-models.html "The Future of Payments: Flexibility, Regulation, and Bespoke Models"), office design is determined by the occupier and not the provider, and can be bespoke to the business’s requirements.

Under the traditional office lease, the possibility that [SMEs may need](https://www.financedigest.com/hung-out-to-dry-smes-need-further-support-to-stay-afloat.html "Hung Out to Dry: SMEs need further support to stay afloat") to expand, reduce, reallocate or relocate their workforce can be extremely costly and entirely impractical. Conversely, opting for a managed [office approach](https://www.financedigest.com/cavai-tests-innovative-new-approach-for-the-home-offices-parentwise-pilot-campaign-helping-parents-and-carers-in-the-west-midlands.html "Cavai tests innovative new approach for the Home Office’s ‘ParentWise’ pilot campaign helping parents and carers in the West Midlands") will allow contracts to be priced on a per workstation basis with no capital expenditure or risk.

With simple, streamlined [systems and structured terms from managed](https://www.financedigest.com/traffic-management-systems-growing-at-a-cagr-of-22-5-for-2022-28.html "Traffic Management Systems growing at a CAGR of 22.5% for 2022 – 28") office options, business owners can invest their time, effort and money into their businesses, not bricks and mortar.

Simply put, the rise of companies opting for flexible office options is allowing them to not only access all the amenities they need at a fixed price, but also to eliminate risk and work within a flexible financial model that fosters their own unique growth and culture.

For more information visit [www.portalgroup.uk.com](http://www.portalgroup.uk.com/).

[\[i\]](#_ednref1) [https://www.monster.com/career-advice/article/job-search-recruitment-cycles](https://www.monster.com/career-advice/article/job-search-recruitment-cycles)

[\[ii\]](#_ednref2) [https://www.premierworkplaceservices.co.uk/knowledge-centre-articles/7-things-to-consider-when-relocating-a-company-office/](https://www.premierworkplaceservices.co.uk/knowledge-centre-articles/7-things-to-consider-when-relocating-a-company-office/)


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