It’s a common debate amongst the city’s tech community. Should thriving businesses reconsider their decision to lease a space in the UK’s capital? Whether it’s because of rising property prices, over saturation, or one of the many other issues facing tech businesses in the Capital, my answer to that question is always a big, fat “YES”.
In fact, I would argue that fast growing businesses in this sector should never take a lease in London, or anywhere else for that matter. And that’s not because of increasing property prices or any of these other challenges, rather, because the tech community and its uncanny ability to shake up traditional sectors in need of change no longer needs to play by the rules of the commercial property sector.
I am certainly not alone in this view. Some of the biggest names in tech are shunning the traditional, leased office in favour of shared workspaces with flexible leasing models. One of our newest members is Eventbrite – a well-known, well-funded global company with offices in seven countries – and since launching in 2013 our community has included the likes of Buzzfeed, General Assembly and Move Guides to name a few.
So why are businesses of this caliber sidestepping leases in favour of flexible workspaces? And what can other tech businesses take from this?
Ambitious, thriving businesses have very specific needs in terms of property. Growth expectations are high – tech sector growth and recruitment is outstripping that of the UK private sector average – and founders often cannot predict whether their business will employ five people or 200 people over the course of a year.
Two of the aforementioned companies joined Headspace with fewer than six employees in their UK team and grew to over 50 within the course of 12 months. This is largely at odds with how the commercial property sector traditionally approaches the leasing of office space, which is traditionally let on a five-year lease for a specific demise with very stringent and onerous parameters. The square footage that they have at their disposal needs to be appropriate for the five years that the tenant is in situ, irrespective of business’ expansion or contraction. Fast growing businesses, however, require absolute flexibility; not only in the length of lease, but also in being able to move within the same building into larger spaces without the rigmarole of changing addresses and service providers.
Also at odds with the needs of thriving tech businesses is the fact that the traditional leasing model places the onus on tenants to fit out and redecorate space to a level that complements their business. Techies generally want a space that matches their brand and attracts the best talent: energetic, inspiring and ambitious.
In the context of a traditional lease, this means spending significant amounts of cash up front. It’s worth adding that thriving businesses also require a working environment that is conducive to creativity, productivity and comfort, whether that means inspiring architecture and interior design, or fostering interaction between a tenant base that includes anyone from app designers to venture capitalists.
Take a look at the flexible workspaces popping up in the capital and it’s clear that aesthetic, environment, community and collaboration are central to their proposition. This concept is nothing new – from Marissa Mayer to Steve Jobs, the belief that collaboration encourages creativity has been a strong one in the tech community – indeed, London’s Tech City thrives on this very thing.
What’s new is that, by shunning the traditional leasing model, thriving tech businesses can follow the lead of tech ‘giants’ such as Google and Facebook, but without the huge capital outlay. For the booming TMT sector, the traditional office setup just won’t suffice.
The lease is dead, or it really should be, for our tech innovators.
Jonny Rosenblatt is MD of the Headspace Group