SMEs cut costs in shared-office concept

On the fourth floor of Development Towers in Nairobi’s Central Business District, three entrepreneurs have teamed up to rent office space— a move aimed at reducing operating costs.

The monthly rent, which comes to about Sh34, 000 for the 350 square feet room, was over and above what each entrepreneur could afford.

“It was more prudent to share out the office space because we can now easily divide the rent and meet other office expenses by sharing resources,” says Mr. Finlay, the head tenant who requested his second name not to be quoted because the tenancy agreement does not allow subletting.

“As long as the rent is paid on time the landlord does not ask too many questions,” he says. “On paper there is no subletting, but practically that is easily handled.”

In the new arrangement they have shared out with each paying Sh11, 400.

Although sharing office space, through hook or crook, has been a long entrenched concept in the Kenyan property market the momentum has picked up in the past two years as entrepreneurs seek ways to cut on their high operating costs in a sluggish economy, industry players say.

“We are having more people asking if there are offices they can share with others,” says Mr. Nathan Mabeya, a director of Rutna, a real estate agency, adding that the key driver for the entrepreneurs is the savings accrued in such an arrangement.

Office rent prices though have stagnated, property agents say rent has stood at an average of Sh65 per square feet.

Buildings where extra services are offered such as generators or cleaning services usually ask for an extra Sh15 as a service charge.

This is because of an increase in the available office space over the last couple of years on the back of a robust construction sector.

Still, for Mr. Finlay who runs a electronics consultancy firm, says the cost sharing arrangement has helped them afford an office space “on the better end of town”.

His two other colleagues with whom he shares an office space are also in the consulting business in the energy sector.

This means unlike wholesalers and retailers, all three of them—being consultants—do not require such large office spaces.

“With the arrangement we could afford a place where it is comfortable to have clients come over,” he says.

To cut further on costs they have shared out secretarial services, where they have hired a receptionist who answers the phone and handles other administrative work.

Then there is the thorny issue of licenses required by the Nairobi City Council to run a business in the area of its jurisdiction.

The trio has wriggled their way around that hurdle by obtaining one licence using Mr. Finlay’s business at a cost of Sh7, 000.

Had they followed the official route then each of them would have parted with Sh7, 000.

But this is a challenge that the once popular executive centres which offered a shared-office concept with common facilities such as a board room, printers and stationery was able to overcome by applying for a common professional licence.

After a two-year slump in business the operators of executive centres are reporting an upturn in fortunes with more interest shown for office space.

“Clients are streaming back and if anything I have more clients than last year,” says Mr. Harrison Karanja, a director of Genius Executive Centres, among one of the pioneers of the shared-office concept.

Started five years ago, the 50 capacity executive centre provides furnished and serviced office work stations together with boardroom and the reception area were shared out cutting costs for the entrepreneurs who took a space in them.

The demand for the office suites was high so much that Mr. Karanja and his partner Mr. Stephen Alala sought to open another centre in Westlands in 2008.

Global recession

However, they were forced to put the plan on ice as the country’s economic growth was curtailed by the effects of the post-election violence and the global recession.

Now they are mulling over the idea of forging ahead with the once shelved plans, but at a different location.

“We are looking at the possibility of staring such centres in Nyeri or Nakuru,” said Mr. Karanja, adding their research had shown these towns had good prospects for the executive centres.
In the city, the interest for office sharing has spread to the outskirts of Nairobi’s central business district.

“Many people are looking for residential houses which can be turned into commercial use for offices,” Mr. Mabeya says citing the ease of parking in such establishment for the business people and their clients.

This has been especially so in the areas outside the Central Business District (CBD) such as Westlands, Kilimani, Upperhill and Kileleshwa where property development has been stepped up.

These areas have also been the hunting grounds for the entrepreneurs looking to escape the parking congestion, a common characteristic within the CBD.

However, not all entrepreneurs are heading for the suburbs some are considering moving to the Central Business District.

They say relocation to the CBD will help them be closer to clients because it is hard to access premises located in areas like Kitengela.

Others are opting to work from the comfort of their homes to evade the high rent charged in premises located in Nairobi.