FOR THE MOTION

Sean Morgan MD,

Avanta India and Middle East

The concept of serviced offices is gaining popularity in India primarily because of factors like flexibility, cost savings, immediacy and convenience

that corporates find very valuable when setting up or expanding their businesses.

Also, there is no start up or teething problems as all serviced offices are fully functional, thus, enabling companies to fully focus on their businesses. Serviced offices are proving more sense to corporates now than ever before because the global economic downturn has made corporates unsure of their expansion plans and they do not want to get into long term lease agreements or invest into buying office space.

Compared to the conventional leased office space, a serviced office does not require any heavy investments neither it requires any lengthy legal procedures. One can move in immediately to a ready to use office which provides the ideal business environment both in terms of immediacy, flexibility, location and cost.

The concept is picking up in India largely due to:

Firstly, with shrinking revenues and thinner staff, companies are looking at compact office spaces that have all the facilities of a modern office and yet do not cost much in terms of rentals and maintenance.

Secondly, a company can vacate the office after giving a one-month notice. In the conventional lease agreement, a company pays up to six months advance rental and cannot vacate the space before three years of signing the agreement.

Thirdly, it helps companies unsure of their expansion plans and they do not want to get into long-term lease agreements with the real estate developers. The deal comes without any hassle of long term lease and advance payment of rentals to the real estate developers.

Fourthly, there’s also an ease of expansion or reduction. The companies can get bigger or trim down space hurriedly and without difficulty meaning that they don’t waste money on inoperative space and can expand without changing their business address.

Lastly, there is an advantage of minimal overheads as minimal advance, no fit out costs, no maintenance costs, and all inclusive monthly payment means ease of budgeting and there’s a great deal of relaxation for companies hiring serviced office space.

Foreseen as one of the increasingly growing trends in India, serviced office business has a huge untapped market potential in the country. l

(As told to PKS)

AGAINST THE MOTION

Dr. Devinder Gupta, CMD, Century 21 India

First and foremost, the disadvantage of serviced office is that the contract can be terminated any time. Even if the terms and conditions agree to allow a notice period of one month, the company that rented the premise will have a tough time resetting its office once again.

The office space service provider should be of repute and serviced office should be strategically located. Or else there is no benefit of renting a serviced space.

As the serviced offices provide a one-stop solution to companies and entrepreneurs, offering services such as executive offices, internet connectivity, video conferencing, wireless access, telephone and fax lines, receptionists and client service representatives, apart from on-site executive assistants, and meeting/board rooms on a pay-as-you-use basis. For those companies, which can manage without some of these services, there will be burden of some extra charges as compared to the traditional office space, where customised service, of use, can be in place.

It has been in practice that the service provider usually increases the cost of individual item suddenly by giving some excuses or the other.

There’s the disadvantage of uniform offices. The business centres differ from transformed buildings to built for use properties, some are full of conventional features or offer original, unique space, however some built for purpose centres can suffer from being rather consistent with offices that are all the same.

There can be instances where the maintenance and services can be delayed due to involvement of three parties (owner, service provider and lessee).

If there are any overhead expenses on some items of daily use, it can be a matter of tussle between service provider and lessee. It can be expensive long term – although the prices of serviced offices can save money on the short-medium, serviced business centres can prove expensive when renting in the long term

In the case of serviced office space, the tax benefit or extra overhead, which is being availed by most of the middle-level Indian companies, will not be available to them (lessee).

On many occasions, serviced office spaces come fully branded with the signage of the brand, which is handling the space, thus making it obvious that the space has been either shared or rented business centre.

Finally, the most important issue is that the concept is yet to catch up India as maximum business people either opt for their own space or prefer to rent space with their own terms and conditions. l

(As told to PKS)