New Scaleup Office: Hidden costs
Office space has been one of the hottest topics throughout my work as Scaleup Enabler for the West of England. If you have followed the story so far, you'll know that in 2016 Bristol was at a 20 year low as far as office space availability is concerned. We saw very full incubators and office spaces across the city region, and in Bath too, with nowhere for the largest companies to move to and a resulting traffic jam of smaller companies unable to move in in their wake. Since then, we've seen some great new coworking, grow-on, and office spaces arrive on the scene - and we have c. 800,000 sq ft in the pipeline for the future too.
Whilst this topic has lately become less of a priority for my work, it is still a challenging area for those companies working through it. Those experts in the office-moving business recommend that you start exploring your options c. 12 months in advance of your intended move date, and that you carefully plan your fit-out and move - you can read a few more top tips in a previous blog.
And it's in this area that I've recently heard a very frustrating tale which I suspect others would benefit from hearing. Having successfully secured and negotiated a lease for an office in Bristol city centre, one scaleup company (who shall remain nameless) reported a problem which it seems (after a small poll) many are unaware of: the perils of the wayleave agreement.
At the very start of their office search, this company identified 'high-speed internet access' as their top priority. Why then did they find themselves moving into an office without any internet provision?
Well, it turns out that, to receive internet access in their office within the building, each company needs to arrange their own provider. That seems fair enough. That is until said provider arrives to do the installation only to discover that you don't have a 'wayleave agreement' in place and so he/she can't lay the 4m of cable required to run the internet from the riser - the big pipe in the stairwell - to your office on the same floor.
I imagine you're asking - what is a wayleave agreement?
It is a short legal document (in this case, just one side of A4) that gives a telecoms service provider a right to install its equipment through or over a third party's land. Essentially, it's a piece of paper signed by all parties to confirm that it's ok for you to install equipment (or in this case run a network cable in the ceiling void).
But it's not just a simple piece of paper. It's a piece of paper which usually takes 4 weeks and can cost around £5000 or more in legal fees to put in place - this includes a building management survey, the costs of your own solicitor to review the contract and a review by the landlord's solicitors.
There's one other complication - this is a three-way agreement between the internet provider, the landlord, and your own solicitor and you need to sign the agreement with the internet (or service) provider before you can create the wayleave agreement as they are named within it. In reality this means you may have to sign a contract with an internet provider before you have exchanged on a lease, potentially even signing an agreement with an internet provider in the early stages of your lease negotiation.
In this instance, the company heard no mention of the wayleave agreement being required until the building management mentioned it on installation day. The scaleup company moving into the office thought their requirement for high speed internet was covered because the building was already fully networked and other tenants were already using this service. However, they simply could not join the existing network in the building without a wayleave agreement. It's not the responsibility of your commercial office space consultant or your solicitor to tell you about it so you can pretty easily find yourself in the same position as this company - and without internet (they had to run their company via a 4G router while they waited for the legal contract to be executed).
So, I find myself wondering - should all offices be provided with network facilities? Should the wayleave agreement only be required for material changes to the fabric of the office or land? Is this one more factor in the ubiquitous quest for productivity? I asked a local specialist for their view on this topic - here's what they said:
“Wayleave agreements can be a real challenge – often varying between providers and buildings, they can even differ with the same provider in the same building on a different letting – each time costing both the tenant and the landlord in legal fees. To avoid these challenges, we encourage clients to make sure their full set of heads of terms makes reference to who pays for the wayleave costs so that it is flagged in the first instance, or that both the Landlord and Tenant try and agree a legal fee cap associated with the wayleave from the outset. In the future, we would like to see managing agents put together a wayleave pack in a standard format as a matter of course which they can share with the occupier. Currently this is all too often done after the first letting has ‘muddled through the process’.”
JLL, Director, Office Agency
If you would like to know more about this topic, check out this useful introductory piece from Moorcrofts Corporate Law:
The other hidden cost that is worth clarifying upfront is your business rates as these are set by the council and will depend on the size of your office (and whether it has been re-sized recently).
If you are keen to learn more about the support available for scaling companies in the West of England, please explore scaleupgenerator.co.uk and get in touch with firstname.lastname@example.org as she is our regional Scaleup Enabler. Employed by the University of Bristol, the Scaleup Enabler exists to identify the challenges faced by fast-growth companies and to work across the public and private sector to enable solutions.