Office Space Advice
Q&A: Manhattan Real Estate Attorney Offers Serviced Office Perspectives
Published May 26th, 2009 by Jennifer LeClaire
While the commercial real estate industry is rallying around the virtues of the serviced office concept in a down market, Ed Mermelstein is offering a contrary view, of sorts.
Mermelstein is head of Edward A. Mermelstein & Associates, a New York City-based boutique law firm that focuses on corporate and real estate law. He helps his client review commercial real estate contracts around the world.
Although Mermelstein sees clear value in the executive office suites industry, he’ll be the first to tell you that this is not the optimal solution for every company in Manhattan. In fact, he’s pretty adamant about it.
aBetterOffice.com sat down with Mermelstein to discuss his take on serviced office space in Manhattan, how expanding companies can benefit, and the cost analysis most executive office space companies aren’t marketing.
Are you seeing a lot of companies opt for serviced office space in Manhattan, given the economy?
Yes, at least short-term. While it is more expensive to rent a furnished office space or a turnkey office space, some people can’t afford to rent a location where they have to set everything up in terms of the telephone systems and receptionist. Serviced office companies make it easy to just to move into a location for a four- or six-month period while you are looking for something else. I see serviced office space as a stop gap measure, but it’s definitely a much more expensive alternative in the long run. It does not makes sense for anybody to do it long-term.
I always thought it is less expensive.
It is only less expensive when you consider what you need to do in order to move into an office, such as buying furniture, setting up fax and copier equipment, setting up telephone equipment, having a secretary in place… If you compare one to the other, long-term having your own space is much less expensive. But short-term it makes quite a bit sense to walk into a ready-made office.
I see Regus expanding like wildfire all across the United States. There are quite a few others that are performing strong in other regions too. Is that a response to economy? What happens to these serviced office facilities when market recovers?
Hopefully they are all thinking ahead and aren’t expanding without considering the fact that if prices continue to fall it will be hard for them to stay competitive. So as far as Regus is concerned, we actually rent in several Regus locations. We use Regus business centers for our remote offices.
In this economy, it doesn’t make sense for us to continue with all the locations we have. We have had to downsize. But for someone who is about to make a move to new location, it’s very easy to move into Regus style office and stay there on month-to-month basis for four to six months while they are looking for new office.
So you see a major benefit for expanding companies, then.
Serviced offices make it easy when you want to expand. Companies don’t have to do anything other than transfer their calls through the new office lines. Everything else is in place. You have secretaries and a fully functional conference room with all the amenities you will ever need. It makes a lot of sense if you need it for temporary basis.
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About the Author
Rob Zeus May 26th, 2009 at 11:53 am
I don’t know who this guy is, but I disagree with him. I think serviced office space can make sense long-term. It depends on the business. I’ve read about some companies that have stayed in executive office suites for years because it fits their model. I’m not sure how anybody can make such a blanket statement.
Elizabeth Sanchez May 26th, 2009 at 12:04 pm
I see what this attorney is saying. He’s looking at serviced office space more in terms of a transitionary period for companies. That is a major use of executive offices. But I do think it can and does make sense for long-term use for many companies. If it didn’t, Regus and others wouldn’t be expanding. There’s not that much turnover in office space, I wouldn’t think.
Maggie Correta May 26th, 2009 at 12:21 pm
I do agree with at least one point this attorney made… the serviced office companies that are expanding need to take in mind the bigger picture. Executive office suites are hot right now, but companies that don’t do the proper site selection and forecasts could be in for a heap of trouble long-term.
Melanie Jones May 26th, 2009 at 12:59 pm
This guy clearly understands the value proposition of executive office suites – he uses them. But he’s also got a clear-cut opinion of how far that value proposition stretches. I am not sure he’s seeing the bigger picture. For his clients, which seem to have big pockets, he probably has the right take on serviced offices. For entrepreneurs, I’m not so sure.
Bill Brookshire May 26th, 2009 at 1:01 pm
I like the “contrary” view. It’s always good to see the other side. Mermelstein isn’t discounting the role of serviced office space in the commercial real estate market. He’s just limiting it as a temporary solution. We all know some companies use it for long-term office space and some use it very temporarily, even by the day. I think that demonstrates the ultimate flexibility of the serviced office model, which is one of the reasons it does so well.