So, you’re leading a startup, juggling myriad responsibilities like staffing, business growth, and profitability. Now, another critical decision awaits: finding the right office location.
Every company requires an address and an operational base. Setting up an office is non-negotiable. While you might be contemplating renting a shoplot, have you considered the merits of renting a coworking space?
Fear not, we’re here to guide you! In this article, we’ll explore the pros and cons of both renting a shoplot and renting coworking space like INFINITY8.
The Benefits of Renting an Office
Renting an office primarily ensures you have a tailored space that meets your specific business needs. Let’s explore the various benefits of opting for an office shoplot:
Below are several benefits of renting an office shoplot:
- Branding and Exclusivity: Exclusive rental allows for full customization of office interiors, furniture, fittings, and layout to align with operational requirements. This setting also provides a platform to showcase your brand identity through personalized interior design and colours.
- Privacy and Security: A dedicated office space enhances your privacy, a crucial factor for businesses requiring confidentiality and security. You gain the autonomy to implement additional security measures safeguarding valuable equipment or inventory from theft.
- Long-term Cost-effectiveness: Investing in an office shoplot holds the potential to decrease your business costs over time. Your commitment to company assets like furniture or equipment may qualify for tax deductions or capital allowances, offering long-term benefits for your business.
The Downsides of Renting an Office
While the prospect of establishing your own office in a shoplot or commercial lot sounds like a dream, there are inherent downsides to this endeavour. Here’s a list of drawbacks to consider:
- Higher Initial Costs: From covering expenses like the security deposit for the long-term lease or rental to installing fixtures and furnishings, these costs of initial setup should be taken into careful consideration. The initial setup costs for your office environment may strain your company’s finances, particularly if you operate on a tight budget.
- Increased resource management: Establishing your office in a commercial lot demands independent management of utilities, maintenance, and security. Managing resources individually can be problematic, leading to increased responsibilities and operational complexities, diverting your attention from core business activities.
- Fixed Commitment, Limited Flexibility: Renting a shoplot requires you to sign a long-term lease agreement that binds you for a minimum of a year, complete with specific terms and conditions. This commitment limits flexibility, hindering your ability to relocate, expand, or downsize due to the obligations tied to the shoplot rental.
In the US, Dropbox made the decision to pay $79 million to give up a quarter of its San Francisco headquarter space as the company predicts that remote working is here to stay. A spokesperson said, “We’ve taken steps to de-cost our real estate portfolio as a result of our transition to Virtual First, our operating model in which remote work is the primary experience for our employees.”
Advantages of Renting a Coworking Space
Situated strategically in bustling commercial areas and central business districts, coworking spaces offer a range of advantages, particularly for startups setting up their offices for the first time.
- Cost-efficiency: If cost reduction is a priority, leveraging the shared resources in a coworking space is a strategic decision. This includes office furniture, internet costs, pantry facilities and overall maintenance. The savings realized can then be allocated towards crucial business operations and potential expansion opportunities.
Respond.io, a pioneering chatbot communication provider, had just relocated its headquarters to central Kuala Lumpur, partnering with the award-winning coworking space, Colony, to create a dedicated office that strikes the perfect balance between work and leisure.
EcoCeres, a leading international biofuel company, has also turned to coworking spaces as its enterprise solution partner, Along with building its new production facility in Pasir Gudang, Johor, EcoCeres has engaged INFINITY8 to set up its 5,000-sqft headquarters at its award-winning workspace, INFINITY8 Reserve JBCC. - A vibrant business community: Within a coworking space, you gain access to an extensive network of fellow startups and businesses. Participating in various collaborations and networking events opens doors to beneficial connections, be it potential collaborative partners or valuable customers for your business.
- Flexibility and scalability: The flexibility and short-term tenancy arrangements of a coworking space provide the advantage of easily scaling up, downsizing, or adapting the workspace to match the dynamic needs of your business.
Moreover, as more employees embrace remote or hybrid work arrangements, opting for a coworking space becomes the wisest choice, lowering your commitment and offering the flexibility to customise your office design to your requirements.
Disadvantages of Renting a Coworking Space
Despite the evident advantages of shared resources and cost savings of coworking spaces, there are corresponding drawbacks to consider before reaching a decision.
- Limited control, potential distractions: As a shared space accommodating multiple companies concurrently, privacy and control may be affected.
The coworking environment, with its community of diverse coworkers in an open office setting, may introduce disruptions or noise, causing inconvenience or friction.
- Generic appearance: While customisation options exist, startups with budget constraints may initially forgo a heavy investment such as an office space. This results in a generic appearance and a lack of brand identity, which may be inconsequential for some businesses but crucial for those aiming to grow a distinctive brand.
- Impact of Short-term Costs: In the short term, a coworking space offers an immediate solution for your office rental needs.
However, it may prove to be more expensive over an extended period, especially when your business expands and requires more storage or office space. The absence of company assets also means fewer tax deduction benefits available for your company.
Making a Decision
When deciding between renting an office shoplot or a coworking space, it’s essential to consider several factors.
Reflect on the nature of your business and assess whether the chosen office space will advance or hinder the growth of your company. Carefully evaluate the allocated budget for this long-term expenditure.
Here’s a simple cost savings analysis when comparing the costs of renting a traditional office versus a coworking space for a team of 5 people.
| Costs (for 5 pax) | Traditional Office (in RM) | Coworking Space (in RM) | Total Savings (renting a coworking space) in RM |
| Initial Setup | 10,000 | 2,000 (if any) | + 8,000 |
| Monthly Rent | 2,500 | 3,500 | – 1,000 |
| Monthly Utilities and Services | 500 | 0 (Included) | + 500 |
| Total Monthly Expenditure | 3,000 | 3,500 | + 7,500 |
In this simplified analysis, the 5-man startup that rents a coworking space would save RM8,000 on initial setup costs, but only managed to save a mere RM500 a month when renting a traditional office.
However, it’s important to note that these figures can vary greatly depending on location, office size, and specific coworking space providers. Additionally, the analysis doesn’t take into account other potential cost savings or benefits offered by coworking spaces such as tax deductions, networking opportunities, or flexibility, which should also be considered when making a decision.
It may be useful to refer to your business plan and weigh the importance of factors such as flexibility, scalability, networking, and the accumulation of business assets. Examine your long-term goals in comparison to short-term objectives to determine if your company is prepared to invest in a permanent office space.
Conclusion
In conclusion, the decision to rent an office shoplot or a coworking space hinges on a delicate balance of factors. While a shoplot offers exclusivity and long-term cost benefits, it leads to higher initial costs and rigidity.
On the other hand, coworking spaces provide flexibility and cost-efficiency, but come with potential distractions and a generic appearance. Ultimately, businesses must weigh their unique needs, budget constraints, and growth plans to determine the most suitable workspace solution.
To finetune your decision for your business, consider seeking expert advice. INFINITY8 offers personalised consultations to understand your specific requirements and provide workplace solutions that align with your business goals. Book a consultation with us today, and let’s explore the various coworking solutions that cater to your business and growth.