The sweet life for office renters - executive-suites industry - Industry Overview

Nation's Business, May, 1996 by Lynn Woods/ findarticles

An executive office suite can offer a convenient, cost-efficient alternative to traditional Manhattan office space.

Almost a year ago, Martin Cohen, a New York City business consultant, traded in the commercial office space he was leasing in a business center on Madison Avenue for a Large Private office space on Park Avenue.

The new office came with a receptionist, a phone-answering and -forwarding service, conference rooms, and an on-site New York business center that provided the equipment and staff for desktop publishing, word processing, faxing, photocopying, videoconferencing, and other services.

Using the on-premises support staff means he does not have to hire full-time help, pay insurance benefits, or worry about whether the receptionist will show up late for work, because a replacement will be provided.

And he routinely holds meetings with important clients in one of the building's three conference rooms--at no extra cost beyond his monthly space-rental rate.

The result? A 40 percent increase in business since his move. "Because of the professional setup, my business is geared to larger clients," explains Cohen. "And the amount of support services means I can respond more quickly" to new opportunities.

The concept of virtual offices--or executive office suites, as they are more commonly known--was introduced in 1967, when San Francisco-based HQ Business Centers, the world's largest provider of executive office suites, opened its first location.

In the past decade, the executive office suite industry has expanded tremendously, says Jane Booras, executive director of the Executive Suite Association, a trade organization in Plano, Texas. She says the occupancy rate for the 500 members of her organization is approximately 80 percent--up about 10 to 15 percentage points in five years. There are between 3,500 and 4,000 executive office suite companies in the U.S., Booras says.

Typically, a dozen companies now compete in booming markets in cities with strong commercial areas downtown--including Washington, New York, Chicago, and Atlanta.

Suburban locations are also popular. Booras says that 90 percent of business owners who lease serviced office space from her organization's members live within five miles of the business center.

The boom in serviced offices, Booras says, is largely a result of corporate downsizing, which has led many big companies to close expensive traditional office space in some cities and instead hire regional representatives. But she says a steady 30 percent of the serviced office market consists of entrepreneurs--mainly professionals, such as accountants, attorneys, financial and public-relations consultants, and people in real estate.

Executive suite office space can offer entrepreneurs numerous benefits. Rather than having to commit to a long-term commercial lease, hire employees, and buy or lease a full array of office equipment, small-business people can simply pay a single monthly fee for a furnished office in an attractive location, complete with business services and facilities as well as a receptionist who not only greets clients but also answers the phone in the company's name.

Shared office space companies can provide as much or as little as a business needs. It might be simply bare-bones mail service-without office space--for about $50 a month. Or it could be a "business identity" package consisting of just mail and telephone-answering service. Another option is an unfurnished or furnished office available by the month, day, or even hour.

On the other hand, some small-business tenants say they actually pay less for long-distance phone service, office supplies, and overnight mail service than they would on their own because of the discounts passed on by the executive-suite company, which can use its volume of business to negotiate lower prices with vendors. 

Yet another advantage is the opportunity to network with other companies in the building. "When you're on your own, you get in your own little world and lose sight of what's going on," says Mark Lenart, owner of a Cleveland construction company who rents an professional furnished office space from HQ. "Here you can share war stories."

John Hardisty, who runs an international consulting firm in Washington, has been an executive office suite renter for 12 years, presently with Metro Offices. He has considered relocating to his home, where he has a fully equipped office in the basement.

But all things considered, his downtown location, along with the flexibility of being able to leave the office early and know his phones are covered, are perks that would be hard to give up.

"The whole thing is convenience," he says. "There's a certain value to not worrying about things."