Why is it so difficult to find an office for my startup?
spaciousapp.com
spaciousapp.com
I'll agree that trying to find an office in London online is pretty futile - the best thing to do is leave the desk and take a walk.
Allocate an afternoon or two to pound pavement and start calling all the letting agencies with signs on the outside of buildings.
In one afternoon I managed to get two viewings sorted for the same day and several for the following days. Most of the agents would email us a daily summary of new properties they'd get in which met our requirements (1500sq ft, Old Street area etc.)
We had our new office sorted within two to three weeks. 6 month rolling lease.
Only fly in the ointment is that I'm still getting emails!
I'm Tushar, co-founder of Spacious (tushar@spaciousapp.com)
I'm glad that you found the process easy once you called up the relevant agents.
The problem we are trying to fix is finding the space online. A lot of people don't want to commit the time to pounding the pavements and physically calling numbers. They would rather be able to browse space online, see all the relevant information and be able to make an informed decision about what they would like to view. In an age where we can browse most things from the comfort of our home, why should commercial property be different? This is especially the case for those who don't live near the area they would like to move into.
Again, everyone's different and I do very much appreciate the feedback!
I agree there are some agents out there who are excellent, and we maintain a very good relationship with them over here in London.
Site looks pretty good. Like the app, and I think once our lease is up (sometime this year) we might just be using it!
As a result, cost and availability are deliberately kept obscure. Cheap small office space is abundant, but usually not offered publicly. You have to ask, and then you get things like "sure, we can split this huge space into smaller units", or "we'll throw in x-months free rent" (so they can officially keep the rent, and therefor the value, high).
Absolutely, this is the norm rather than the exception. However, asymmetric information only works as long as most parties in the market are acting in this way. As soon as people start being more open, this changed the landscape very quickly, which is what we are seeing in London.
If the market does indeed stay that way, rather than wasting time talking to individual spaces we are working on technology that should be able to inform all those with space (even if they keep the price hidden) of search and budget requirements of a potential. This should at least open dialogue.
Make the pictures click-able in the search view. In fact, why not make the whole search result click-able...
Also the -/+ and the </> buttons are just a bit of a strange UX feature and have too small a hit area for such an important feature.
I was a bit confused as to what the '£500' actually meant, turns out it's pppm. I now notice you have a hover state, but hmmmm.
Also the font looks horrible on Win 7 Chrome. I know, I know, it's Chrome's fault, but it still looks horrible.
Overall, nice app, looks good.
We've heard some of those things before and will definitely keep iterating on it!
Appreciate you taking the time to comment!
lol for honesty.
I didn't find it hard. We got a serviced office near Farringdon tube via a broker. (flexi offices) after looking at about 10 places in the arc from there to Old St. Signed a 1-year lease with a 6-month break, just in case things went south.
We have received a lot of feedback from those who have found it difficult, especially to do this online and that's what we're trying to fix.
What kind of premium were you prepared to pay for this risk to the owner? If your answer is <10%, or even <50% depending on the actual amounts we're talking here, do you find it irrational that you had trouble finding an office?
That they'll have to pay advertising again?
Because if you don't move in, it's still empty.
If no-one was interested in or willing to sign a 3 year contract they wouldn't be able demand it.
However, as the economy evolves and high growth companies companies become the norm the number of people willing to commit to a 3 year lease will start diminishing. This not just because they are not able to forecast their financials, but they are not able to forecast their staff numbers either.
It's an interesting time for commercial property and it'll be intriguing to see how this plays out.
Completely agree. At the end of the day markets depend upon supply and demand forces. The economic landscape looks much different to what it did 10 years ago. Smaller companies that need contract flexibility are springing up everywhere, and the demand for flexible space is increasing. There's only so long this can be ignored by those operating or owning commercial space.
It's not just the 50$ or whatever to put up one online ad. You need to advertise on several websites plus offline. You need to show around various candidates, and do background checks on the serious ones. You have to transfer utilities, deal with mail, and other assorted tasks when somebody moves in. All of this for (in terms of yield) slim margins. And assuming that nothing is damaged or needs fixing up after somebody moves out.
Now, for commercial space it gets worse. When they go out of business, it's highly unlikely that you will recover the owed rent - likely several (2-3) months. Commercial real estate is vacant for longer, and having a tenant 'in between' basically 'resets' the cycle of getting a new tenant. (businesses take a few weeks to months before deciding, residential is usually faster, i.e. faster turnover)
Also, businesses usually make changes when they move in, not always for the better (network rewiring, dividing space etc for offices - for storefront it's much worse still). If they go bankrupt, you as the owner are stuck with the cost of repairing. The deposit (a paltry 2 or 3 months rent) is usually not sufficient.
Again, all of this is assuming that there are no 'real' troubles - no lawyers involved, no 'real' renovations needed after they move out, ... Just the cost of getting somebody to dispose of an abandoned office full of furniture costs a month rent, because second-hand office furniture isn't worth anything!
For me, I don't bother with terms of < 6 months for rentals, not even for a 100% premium (residential that is, I don't do commercial). And 1-year leases I only take as a 'probation' period, if it's clear from the beginning that they have no or little intention on staying longer, I won't accept such a candidate. Financially it just doesn't make any sense, and I'm not even counting the stress and the hassle.
Well there you go. The standard in residential is 6 months - year, so what are you talking about?
It sounds like someone trashed your residential house and you're personally angry about it.
Being screwed over is a risk of doing any business and you can't take it personally. Some people will screw you over, not pay invoices, bills, etc.
You can't base all your future dealings off that one event.
Nobody trashed any of my properties, and the disputes I had were settled in my favor by the courts. I'm a lawyer, I can take care of myself. My point wasn't about me - it was about illustrating that short term rentals don't make financial sense at the rates people expect, and that most prospective tenants don't see that. Everybody thinks that real estate is easy money, but it's very competitive, the margins are slim and one decision on who to rent to can make or break your ROI for that year.
In our experience we have found that there ARE spaces available for companies such as Chris' that have little idea of where they will be in 6 months time. At the end of the day, startups and becoming more and more commonplace and the demand for space with contract flexibility is going up with it. It is up to landlords and operators of space to decide how they react to this. They can either ignore it, leave the space open until their find their 5 yr client. Or they can attach a slight premium to the space and rent it for a more flexible term.
In general, we have found that space operators and landlords and increasingly accommodating for this and are attaching a risk premium. It may not be as high as 40% but there is something there. They achieve this by paying rent on a sq ft basis, but letting out the space on a per desk basis. If you do the maths, you can achieve a relatively attractive spread assuming x% occupancy.
We believe that Spacious can help liquidity in the market by making landlords and space operators confident that if they react to shorter contract lengths, they won't have to worry about long periods of vacancy as a potential tenant would be able to find them easily.
What I was reacting to is what I hear relatively often - 'hey my house/room rent is X / m2, why can't I find an office for that price? It's just me and my buddy and we're broke and most likely out of business in 6 months, why don't landlords love us?'.
"We believe that Spacious can help liquidity in the market by making landlords and space operators confident that if they react to shorter contract lengths, they won't have to worry about long periods of vacancy as a potential tenant would be able to find them easily."
It's not clear to me what you're doing any more, since you seem to contradict yourself. Are you about making landlords turn themselves into coworking spaces, or do you have some way to guaranteeing a higher occupancy rate for owners, or are you just Craigslist for office space, like there are a zillion others? What's your added value? The coworking space is so crowded, I don't see any savvy owners who are not in dire straits dive into that market any more in 2014. There is vast oversupply (at least at price levels that make it profitable) in the (admittedly small, niche and out of the way) markets I know about. Those who tried it find out very soon that the small hidden costs add up very quickly, and that it's a completely different kind of business from 'just' renting out property (and a business most don't want to be in).
We're not at all about making landlords turn themselves into co-working spaces.
We want to make renting office space easy.
At it's most basic distillation this means "search and transact" - matching supply and demand as best as possible. We believe this is broken due to assumed knowledge, market fragmentation and asymmetric information as mentioned in the blog post itself.
This not only improves the experience for companies looking for space, but allows those who own space to be discovered a a lot quicker. The very fact that zillions of craigslist clones already exist goes to show that this problem just has not been solved yet.
What we mean by Spacious helping liquidity is a derivative of search and matching supply with demand. If you are confident that you will be able to find a tenant quickly because there is a platform that exists to effectively match supply and demand, then you may have slightly less hesitancy in letting out your space to someone for <1yr.
Of course, I absolutely agree that common sense, and a typical risk / reward scenario means that you will always want to lock in a tenant for as long a lease as possible. This tenant would ideally have great covenants and >5yrs of financial history.
The point I was referring to in my initial response was to the no. of companies now springing up that need <1yr leases because of uncertainty and how a space owner may benefit from that... whether this is from co-working or subletting if you are already a tenant.
Your insight is very much appreciated and I really do enjoy discussion around this!
In most areas there are sites that are set up by real estate brokers. Their agents or licencees or franchisers or whatever input all properties in their central system and they all end up on that brokers website, and submitted to big sites as well. Is your schtick to squeeze out this middle man? To offer a platform to people who don't use agents? If so, how are you making money? Do people pay to list their properties, or do people finding properties pay you?
Look, not to be shitty about it, but you said e.g. this:
"We believe that Spacious can help liquidity in the market by making landlords and space operators confident that if they react to shorter contract lengths, they won't have to worry about long periods of vacancy as a potential tenant would be able to find them easily."
I see no other way to interpret this is 'we list your properties on our website so don't worry about losing 3-4-5 months of rent on a short term contract because we can find another one like that very fast'. Actually I didn't understand it like that at all when I had only read the OP, but the more you explain, the more I get the feeling this is it. What makes your site find tenants faster than other sites?
That said, look at www.42Floors.com, clean, crisp, right to the point. Better yet hope they don't open a London branch :-). As an exemplar for an online experience tailored to a particular demographic (small space seekers, ie startups) they hit a lot of the right pain points. Sort by neighborhood? check, space constraints? Check, it goes on but I'm not here to advertise them, I'm just comparing notes.
If you're catering to startups, and it looks like you are, then the 'office space' problem is probably the CEO or VP Ops' "other" job. Their needs change from seed, to series A, to series B+. How do you transition them into 'bigger' space and hand over the reigns to dedicated facilities person in the company? Do you co-ordinate other services? Janitorial, snacks services, 'fix it' type services? How about vetting/rating landlords, another useful service for the startup founder. If you want to be the "AppStore of Space" you need to consider that the person using your service really doesn't want to make it their life's work, and at the same time doesn't want to look stupid for picking "this space."
Really appreciate the feedback and we have indeed looked at 42floors
The other points you mentioned are things we are thinking hard about at the moment and building out solutions using a lot of customer discovery
Additionally, my biggest annoyance with the commercial real estate is the "MANY OFFICES UP TO Xsqft/FROM £Y". I was hoping this would be something where the lettor had to list offices as opposed to just a general space that can be broken up.
We think this is of enormous benefit to landlords:
1. Fill vacant space for which you are business rates (UK specific)
2. Be more visible in search for when companies are looking for space
3. Have visibility over the state of the market and what type of space people are demanding
4. Have confidence that if you let your space on a flexible basis, that you will always be able to sustain a high rate of occupancy
5. A beautiful profile of your space online, where thousands of businesses looking for space in your area can come across you
Thanks for the feedback!
We were initially hesitant in posting this on HN because of this exact reason. However, this was actually posted on our blog and people actually found the content useful. This included not only those who were searching for space, but also serviced office operators and some of the largest commercial agents in London.
We decided to post it on here this week to see if people had the same problems in London, but also in other cities.
The market is very opaque, so it took us a while to figure out and articulate these issues.
I'm Tushar, co-founder of Spacious (tushar@spaciousapp.com).
Our vision is to make renting an office easy by pulling together a fragmented market and presenting the company searching with all the options available for their specific criteria.
Once you know where you want to move to, we help you arrange your entire move, storage, furniture, utilities etc.
If you are renting out excess space, we manage the entire headache of taking rental payments and licencing agreement for your space.
Do let me know if you have any more questions!
I agree with you - it needs to be easier on the eyes!
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