Cost comparison: Flexible spaces vs. Office Leases

With remote and hybrid work models booming, leaders worldwide are now questioning the ROI of their offices. Are long-term leases still a sustainable model? Can we go for something more convenient—and affordable? Are flexible workspaces more economical than our classic office leases?

CBRE found that in 2023 tenants will be focusing on optimizing the quality of the work environment and costs of the workspace. But, what’s more likely to provide the balance between creating an excellent workplace experience and finding a cost-effective solution for distributed hybrid teams?

Learn more about the current costs of commercial real estate and how flexible office spaces and traditional office solutions compare in terms of financial sustainability.

Traditional Office Spaces vs Hybrid Offices: What’s the Difference?

Almost half of the companies in finance, HR, and technology have already ditched the traditional way of working and are embracing the hybrid work model. What exactly is the difference between renting a conventional office space and a flex space?

In a traditional type of office space, you:

  • Typically lease it for a longer period of time
  • Have more freedom when it comes to office space layout and design
  • Can usually accommodate a larger team
  • Take care of utilities, cleaning, and other expenses office maintenance expenses

Meanwhile, if you opt for a flex office, you:

  • Usually pay for short-term usage (like monthly or daily passes)
  • Don’t need to decorate or equip the place
  • Can accommodate a smaller team, with the possibility to scale up
  • Have no responsibilities when it comes to expenses other than your membership
  • Have no control over the space and how it’s designed
  • Usually need to plan space utilization ahead based on the workspace occupancy

Both types of office spaces have their pros and cons, and it’s on the company to decide what conditions will work the best.

However, there may be a significant difference in pricing between the two options, so many companies are starting to reconsider their choices.

For example, in 2021, traditional office leases in the US cost between $8 and $23 per square foot on a monthly basis, depending on location. Despite the decreasing interest in long-term leases, rents continue to grow, reaching $38.96 per square foot in Q1 of 2023, especially in big cities like New York.

On the other hand, there are flexible workspaces, which typically have good offers for companies and turn out to be more affordable in most cases.

You may have already gotten an idea of the aspects in which these cost discrepancies may appear. Both leasing a “forever” office and renting a flexible one have their pros and cons when it comes to expenses, but let’s dig a bit deeper into the cost comparison so you can decide what fits into your budget more easily.

Average monthly fees for leasing vs flexible workspaces

In open-space offices, there’s usually a space of 100-175 square feet per employee. The office size, of course, depends on how big your team is and who’s working remotely or coming to the office.

So, say you’re leasing an office in the traditional sense and it costs you around $15 per square foot (based on the example we mentioned in the previous section) for your 15-people team. This number of employees would need at least a 100-foot office, which would be around $22,500 per month for rent only.

And what about flexible workspaces? Based on the information available online, you could rent a private office for $500-$3000 per month, depending on how many people you’re looking to accommodate.

Try out Gable’s office cost calculator, and find out how much you can save by moving to flexible workspaces >>>

Discounts

When renting a long-term office space, you’re less likely to get a discount - your monthly rent is always the same.

However, if you check out a third space website, you’ll see that they typically don’t publish official prices for office rent—you need to send an inquiry to calculate the costs. It’s because flexible workspaces often offer custom-made prices and discounts to fit your needs and provide the best service possible.

If you’re planning to settle down in a flexible workspace for a few years, you are typically able to negotiate a more affordable price and choose different types of subscriptions, with the flexibility to change your contract if you decide to scale up.

Additional and hidden costs

Companies that rent offices or office buildings have additional expenses that overcome the rent paid to the landlord. There are also:

  • Utilities (up to $500 per month)
  • Internet (around $60 per month)
  • Equipment (around $500 a month if on lease)
  • Cleaning services (up to $350 a month)
  • Office supplies (up to $300 per month)
  • Deposit (typically 9-12 months in advance)

Some companies even supply their kitchens with food and drinks and add other perks so their monthly costs can go up quite a lot - it reaches almost $5000.

And here are some other expenses that many seem to forget about: what if you need to relocate or your team grows and you need a bigger space? Moving your entire office would cost much more than just picking up your stuff from a flexible workspace and going to another. Also, potential repairs in the office would have to go out of your own pocket.

With a traditional lease, it’s hard to plan in advance. We’ve seen many startups scale and grow over 10 times in a single year with their headcount doubling, or even tripling. If you set up in a small office because you couldn’t have predicted such growth, moving to another, bigger office may represent a significant expense.

However, at least you get 24/7 access to your office in case of emergency. When renting flexible office spaces, you can only use the premises during the space’s working hours. There are exceptions, though, that allow around-the-clock access.

Flexible workspaces are a completely different story. The cleaning service and utilities are not your concern in this case and are included in your monthly fee. You typically have access to multiple amenities while working in such a space. For example, you can get a coffee or two for free, use free Wi-Fi, or relax in the chill-out room.

Some coworking spaces charge for additional amenities, usually for the use of conference rooms, parking, office supplies, and equipment such as scanners and copy machines, etc. In that case, the prices may slightly increase.

Office lease or flexible office space—which one pays off?

Back in 2018, the demand for flexible offices among corporations increased by 21%. Many find flexible workspaces ideal for short-term team expansions or providing additional workspace for independent contractors, like when they’re testing new markets.

Today, the trend continues. Workers seem to be slow in returning to the office: San Francisco’s office vacancies have reached a record 25.5%, compared to just 4% before the pandemic started. In this city, over 10 tech companies are keeping their offices available for sublease because the large meeting rooms and office spaces no longer meet their business needs modified by remote working.

By hiring regardless of location, these companies have found it more affordable to lease flex spaces than buy or rent huge office buildings. But is this the future of work for all businesses?

A flexible workspace can be a fantastic and cost-effective solution if your team is distributed around the world and you want to provide a workspace for them other than their home. Flexible workspace providers typically offer plenty of solutions to fit your team’s needs, such as hot desks, common areas, private offices, and executive suites.

On the other hand, large corporations may find conventional office leasing more affordable, especially because they’re able to control the space and have long-term plans. Some flexible workspaces do offer larger conference rooms and offices that are a good fit even for teams larger than 50 people, but it seems that the vast majority of them are more suitable for small to mid-sized teams. That’s why they’re great for startups and small businesses.

Before opting for any solution, calculate the potential costs of renting flexible offices and compare them to find the ideal choice. The question is—what’s your budget, and what fits your workplace strategy?

Flexible workspaces are steadily beginning to gain more popularity among corporate clients, too, and there’s no universal solution that fits everyone—it all depends on the workspace occupier’s individual needs.

Check out these beautiful meeting spaces you can book with Gable!

Choosing the best solution with Gable

Overall, a flexible workspace is usually a less expensive option. The prices may vary depending on location, your team size, your needs (dedicated desks, private offices, larger rooms, etc.) but it’s possible to negotiate a good deal and when all the expenses are taken into account, regardless of the length of your stay, your annual payment for a coworking space will be lower than a conventional lease.

If a flexible workspace solves problems for your distributed team, reach out to Gable. We’ll help you find, book, and manage your flex workspaces through a simple, but powerful dashboard that allows you to monitor your team’s workspace utilization and provide them with the best experience possible, increasing employee satisfaction in the process.

At the same time, you can monitor utilization metrics and make sure your budget is optimally spent on spaces that actually make a difference for your company by enabling collaboration and teamwork.

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Andrea Rajic