Start-up companies and entrepreneurs form a significant part of the UK economy.  The October 2018 Budget announced a three-year extension of the British Business Bank’s Start-Up Loans programme to make it easier for this sector to harness funding.  Research by Moore Stephens in the same month revealed a significant increase in those over the age of 22 who choose to start their own business, citing one reason as the increased availability of flexible workspace.

Whilst start-ups may begin at the kitchen table or in serviced offices, many soon outgrow them.  Those which need bespoke facilities (e.g. labs, manufacturing lines or storage) must source these early on from a third party landlord.  Likewise, businesses that need larger, exclusive occupation of office space. 

Despite Covid, demand remains high: in summer 2020, Bidwells reported demand for 860,500 sq ft in Oxfordshire alone, largely driven the science sector, of whom a significant proportion are start-up and spin-out companies. Landlords who know how to package their property in a way that appeals to start-up sensitivities will therefore inevitably be ahead of the game. 

In this first of a series of three blog posts, we will consider five of the most important aims of start-ups when taking new space:

  1. Certainty of aggregate cost.  With tight cash flow, there must be no hidden surprises.  That cost includes rent and rates but also less obvious costs such as service charge, contribution to common facilities and potential repair costs (based on what the tenant has to repair and what state the property is in).
  2. Flexibility of commitment. Start-ups prefer shorter leases, or the right to break early without penalties.
  3. Freedom to adapt the premises physically, so they are fit for their proposed use, without delay or cost.
  4. Excellent connectivity.  No business can survive for long without swift and reliable broadband and telephony, so premises where this is already established, or can be brought in easily, will be attractive.
  5. Speedy completion.  Start-ups are almost always in a hurry to take occupation!

Author: Laura Gorman, Senior Associate in Commercial Property, Penningtons Manches Cooper LLP