The office trend every start-up should consider

Nairobi Garage

The high cost of office space in urban areas is changing how work gets done. The search for affordable business premises to launch and run operations has turned co-working spaces into a popular option for small and micro-enterprises.

Further, changing attitudes to the traditional office culture, which has been fuelled by technology and a younger labour force, is pushing both start-ups and established firms to opt for co-working spaces.

These spaces offer users the opportunity to work independently in an office they share with other professionals.

Over the past few years, there has been a sharp rise in the number of spaces in Kenya’s urban centres offering entrepreneurs the opportunity to work, network and even test their products and services on a sample market on the cheap.

Two months ago, Ikigai, a co-working space that also offers yoga classes, wellness consultations and outdoor walking tracks, opened a new location in Nairobi’s plush Lavington estate. It’s office packages start at Sh10,000 a month.

And then at The Twig, a new co-working space that opened last year along Waiyaki Way, members get 24/7 access to work spaces from Sh15,000 a month. Membership also comes with an official address and free access to networking events.

On the second floor of Ad Life Plaza along Kilimani’s busy Ring Road, entrepreneurs can get a permanent desk at AXLR8 for Sh20,000 per month.

Hannah Clifford, the director and co-founder of Nairobi Garage, another co-working space, says more businesses are setting up shop in shared spaces both as a means of reducing operating costs and to respond to changing times.

“Globally, the appeal of the eight-to-five job is waning; today, many people don’t have to be attached to a workstation fulltime,” she says.

Hannah adds that competition between companies to be lean is seeing more firms seek more flexible working environments for their staff.  

“For a lot of small companies, office space is a massive cost. If you have 50 employees and only 10 need to be in the office, the other 40 can have a more flexible arrangement.”

Important insights

Start-ups and foreign companies further find co-working spaces alluring as they offer an opportunity to experiment and obtain important insights on the market before they commit to long-term leaseholds.

Nairobi Garage itself has grown almost three-fold from 12,000 square feet a few years ago on Ngong Road’s Piedmont Plaza to more than 50,000 square feet spread across two locations. With about 50 companies in their two locations, Hannah says demand remains high.

Last week, the Garage opened a third location in Karen and is looking at setting up another one this quarter to push its overall square footage to between 70,000 and 80,000.

This comes even as developers and landlords of commercial property in Nairobi count losses as an oversupply of new office space against low demand pushes earnings to new lows.

A real estate industry report by investment firm Cytonn released last year on rental yields for commercial property across places like Nairobi CBD, Upper Hill and Kilimani indicated a downward trend in coming years as the glut persists.

“In 2017, Nairobi had a total supply of 31.8 million square feet of office space, with 3.5 million square feet delivered with an average occupancy level of 83.2 per cent,” the report noted.

“This resulted in a supply of 6.3 million square feet against a demand of 1.6 million square feet.”

Despite the glut, however, the cost of obtaining affordable office space for start-ups and SMEs remains prohibitive, creating a gap that co-working spaces are only too eager to fill.

“Up until very recently landlords have remained unmoved on rental costs even as buildings go half-empty, and it’s been hard to negotiate on leaseholds,” says Hannah.

Shorter commute

She adds that most landlords prefer long-term leases averaging six years.

This is a challenge for new businesses uncertain of the environment and thus reluctant to commit to such long-term arrangements.

At the same time, some leaseholds guarantee only bare spaces without basic amenities, such as electricity, water and Internet cabling. Customising the space to the specifications of a business often means additional capital costs.

Having several options on where to work from is an advantage for entrepreneurs starting out with lean budgets and in need of little permanence.

Other considerations that make shared spaces alluring to business owners include the need to shorten commutes. Many residents in urban centres lament the man-hours lost in traffic jams.

This has informed the location of co-working spaces.

“Typically, we look for locations where adequate transport infrastructure, vibrant businesses and residential estates intersect,” explains Hannah.

“Places like Karen and Upper Hill, for example, have no community spaces but have the residential and commercial ecosystem that can support one. It’s the same case with Gigiri.”  

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