Covid impact could lead to excessive amounts of Used Office Furniture being made available

After the Covid-19 lockdowns have finally ended, are companies going to  close down their offices en masse and encourage everyone to work from home, or will everything go back to normal and carry on exactly where we left off a year ago?  Or has Covid simply signalled the end of office working as we know it and made way for a new type of working lifestyle that is yet to be defined? Who knows? – there’s a lot of talk and a lot of different opinions.

But whatever happens, the office furniture market will probably be impacted one way or another, particularly in the short term. Many business have sadly gone under, and for sure more will follow, so this will lead to offices sitting empty simply because the occupiers are no longer trading. Then there are the companies who have managed to weather the storm and have discovered during the pandemic that home working is actually perfect for their business – I have just heard from one customer, a small firm of lawyers with an office in Central London, who’s staff have enjoyed working from home so much and have been so productive doing so,  that they have decided not to renew the office lease when it expires in a few months time. I think it’s fair to say that this is not representative of the working needs of businesses across the board because these particular people are lawyers who benefit from working in quiet isolation away from others because their work requires a high level of focus and concentration, and they also don’t have such a need to interact with colleagues on a regular basis, so this one example should not be taken as an indication of what will happen everywhere else.  Needless to say, there will surely be other companies with similar plans that will leave even more city offices empty.

All of these empty offices will probably be kitted out with desks, chairs, cupboards and other office furnishing items that will need to be scrapped, sold or given away. Perhaps some of it will be given out to staff to use at home, but most will probably be the wrong size, style or colour for home use. Furthermore, much of it these days is bench style desking and completely unsuitable for home use – see are bench desks a good investment? So, it has to be assumed there will be a glut of used furniture on the market in the near future.  More about this later.

But what about everyone else?  In the shorter term, at least, there will probably be a slowing down in the uptake of new office space and a certain amount of downsizing and shorter leases, particularly where businesses are coming towards the end of term on their current lease and want breathing space to observe the trends, access their own needs and gauge the feelings of their employees.  Companies with lease renewals will think carefully about renewing them on existing offices and possibly favour shorter leases on smaller offices.

Even if there is a significant return to the office, it is likely that many businesses will re-consider the way they use them, furnish them and arrange them. Perhaps this might come about in direct response to legislation (there is none yet but who knows what new rules governments around the world might impose if they are fearful of a repeat of this, or a new type of deadly virus if we don’t change our working habits and environments for good).  Or perhaps businesses, particularly the larger corporates whom everyone else may feel compelled to follow, might reshape the working environment in order to protect their staff against, or minimise the effects of, the possibility of a future disease.  It might just be that they want to be as sure as possible that if it does happen again, their staff can continue working from the office rather than homeworking.  Who knows, but this could take the form of spacing desks further apart, or having bigger desks, or maybe shifting back towards the 1980s when we had open plan offices that were sectioned off desk-by-desk or team by team by tall free standing screens or furniture. As such, their existing furniture might not be the right size, type or shape to enable such revisions (for example, some bench desks might not be re-configurable as stand-alone desks) so whilst this might give a big boost to new furniture sales, even more used furniture may appear on the market.

All of this is purely hypothetical. It really is too early to see how businesses are going to react and what is going to happen to the market, but the one thing I am fairly sure about is that there will be a greater than usual surplus of used furniture.  Is this a good or bad thing?  On balance, probably bad.

There are a finite number of businesses that would want to invest in used in preference to new. The biggest danger is supply outstripping demand and if that happens, there are very few longer term winners.  A large number of sellers chasing a smaller number of buyers can only have one outcome – lower prices for the buyer and lower returns for the seller.  Fabulous for the buyer, but longer term it will probably lead to a levelling out whereby the secondhand furniture trade, who only have limited storage space, will buy up only the really desirable, high value kit and everything else may have to go to landfill or recycling – a sad prospect for the environment and the seller alike.

And finally, if there is an immense take up of used desks, chairs, filing cupboards and soft seating then the likelihood is that this could have a substantial negative economical impact on the manufacturing of new office furniture products.

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The Risks of Selling or Buying Used Office Furniture Privately

We created a page on our website to enable end-user companies with unwanted used office furniture to reach out to other end-user companies that might have a use for it and be prepared to pay something towards it.  But whether you are buying or selling, there are many complications with end-user to end-user dealings rather than via the trade and in this article I am going to attempt to identify them – to help you avoid making costly mistakes.

Selling direct to other end-users

First and foremost, you should only try this if you have time on your hands and even then you should always have a backup plan in place for either a rubbish removal firm to take it away or a 2nd hand trader to take it off your hands. If you don’t, you could get into all sorts of very costly problems.  By this I mean that if, for example, your lease is about to expire, the office is full of your old unwanted furniture and the landlord expects it to be completely vacant in a few days time, then if you’re furniture is still there you will, most certainly, get an exceptionally hefty bill for its removal and disposal regardless of whether it is of value or not (invariably far higher than if you had done it yourselves because they can charge a premium for their time, the maximum acceptable disposal charge plus bill you for breach of contract). It will become the property of the landlord for them to do with and profit from (if there is any value) as they see fit but be assured they’ll charge you anyway!

If you do get a buyer, you or they still have to get everything out of the building and transported to their office.  Firstly this is normally far more involved and costly than you might expect and should therefore be a consideration in the sale price negotiated, but secondly you need to be absolutely sure the buyer has arranged the collection and that the window given to them is sufficient for them to get everything away in time. It’s important to note that it could take longer to dismantle everything and get it out of the building than it did to bring everything in and assemble it in the first place!  That’s because the new owner wants to be sure that by time it reaches their office it is still in good condition with all the parts and original fixings,  and because it is no longer all together in protective packaging it just takes that much longer.  And finally, you need to be sure that whoever they get in to dismantle and remove your old furniture are professionals who are not going damage the walls, ceilings and floors in the office and common parts/lifts etc with gauges, scratches and marks that your landlord will charge you for to put right.

Make sure the buyer takes it all unless you’re getting a fairly decent price for individual items! If they don’t, you may be left with a whole load of stuff that costs almost as much to dispose of as it would have been to junk everything.

Get an agreement, in writing and well in advance, from your landlord giving special permission to waive any normal restrictions relating to permitted times for use of lifts and carrying large items through and out of the building. This will apply to your whole office move, not just removal of furniture. You can’t afford to be restricted by times or methods of moving out as quickly and as efficiently as possible.

Finally, however little you might be offered (or conversely however much you might be charged) it is invariably going to be far more straight forward and considerably less time-consuming on your part to part company with your old desks, chairs, cupboards and so on by handing them over to a dealer. You might consider your time much better spent running your business and generating income rather than attempting to gain a relatively small amount from selling office furniture items. Whatever you do, the first step should probably be approaching a number of people in the secondhand trade and finding out what, if anything, they’re prepared to pay you.  If it seems reasonable, go with it!  But if they’re offering little or wanting to charge for the removal, then by all means try the end-user to end-user route if you have the time  – not withstanding all the issues identified above.

Buying direct from other end-users

There’s probably less downside here, assuming you can negotiate a really good price, but here are some considerations you should pay attention to:

As mentioned in the note for sellers above, you will probably need to make your own arrangements to dismantle desks, cupboards and other larger items of furniture, get them out of the seller’s building, transported to your own office and re-assembled.  That’s a lot of work and can be quite costly so be sure you make allowances for this when you agree a purchase price.

You need to be sure that desks and cupboards, in particular, are easily dismantlable without risk of damage so that it can be done quickly but also that they can be re-assembled back at your office without any loss of functionality, sturdiness and appearance.  It is worth doing a trial run on a couple of units before committing to purchase just to be sure that the original fixings are all there and easily removable and that that the original installer didn’t compromise or force the assembly. If it can’t come apart or be re-assembled without breaking, you shouldn’t even consider it. Just to stay on this subject a little longer, most wooden components of office furniture are usually MFC (chipboard) which is not particularly ideal for securely fixing screws unless they have fitted with quality metal fixing inserts. Much of it, particularly at the the lower end, does not stand up well to re-assembly.

New furniture can often cost less than you think.  Of course, its worth considering quality used furniture rather than budget new furniture, but be careful you’re not paying for budget used furniture when you might be able to get some nice new mid-range products at an affordable price.  Be sure to compare the total package cost – product, transportation and assembly – rather than just the product itself.

New furniture is usually available in a wide choice of sizes, styles, colours and finishes. With 2nd hand you’re restricted to whatever is on offer. No matter how good the value, it might be a compromise.

Buying 2nd hand furniture may restrictive if you need to reconfigure your office or add desks in the future. Whereas there is never any guarantee that further down the line you will be able to get another couple of desks of exactly the same colour, finish and specification from the manufacturer you bought them from new, it’s far less likely you will be able to do that with the used furniture you bought. So, you could end up with an office full of mismatched kit.

There will be no warranty when buying from another end-user.

Finally, make sure that whatever you buy you can physically get into your building (through doorways, corridors, up the stairs in particular). Not everything can be disassembled, particularly certain cupboards which are originally supplied not as flat pack but factory assembled instead and may have been glued or welded (if metal). But even if things that are flat packed  could contain some very large and heavy panels or boards (e.g. reception counters, big boardroom table tops etc) which might also be too large to get up stairs or around tight corridor corners.

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The high cost of Office Dilapidations – Are you sure you can afford them?

By Crispin Maby

When looking for a new office to move into, the cost of rent, rates and service charges are not the only costs to consider.  Making alterations and fitting out the interior space to suit your needs is another potentially large cost, but often overlooked is the cost of putting it all back as it was at the end of the lease – dilapidations.  This can be a very nasty sting!

Most office occupiers will be aware of the end-of-term dilapidations lease clause which normally requires them to reinstate their office back to the same specification and condition it was in when they moved-in, but many are unaware of how far reaching and costly this can be. It’s not uncommon for the cost of dilapidations to be as much as, or even more than the amount they paid to have the office fitted-out in the first place.  Yes, you read that correctly but I’ll say it again, in a different way.  The cost of handing back your office to the landlord at the lease end could be greater than what you spent fitting it out when you moved in!!   So, before you commit to a property, you need to be absolutely sure you can afford the cost of both fit-out and dilapidations.  Even if you simply move straight in and do absolutely no fitting out (no partition walls, no new flooring, no electrics etc) there will almost inevitably still be a dilapidations cost in the end, and that could be substantial.

The cost of dilapidations is, to a certain extent, relative to the specification of the office space the landlord has provided (i.e. whether a new build or newly refurbished, what has been included and the quality of fit out) and how much the tenant then alters or adds to the space and causes wear and tear to the landlord-provided finishes.  The newer and higher specification of the landlords building and their base fit-out, the more it is likely to cost you both in terms of your own fit-out and dilapidations.

Taking on a shiny new office can be a very exciting time for an expanding SME, but they must be sure they can afford it. Not only are there the rents, rates and service charges but also the cost of fit-out (a topic for a separate article) and dilapidations. It should not be overlooked that dilapidations, although maybe 5 or so years down the line, are going to come into play at exactly the same time that the company is having to pay out on the fit out of the next office they take on, so in effect potentially doubling the cost of the office move.

The landlord will be uncompromising. Whatever is stated in the lease agreement must be done. Try as they (the tenant) might to point out that they have made significant improvements, or that the fabric has only been subject to normal wear and tear, these justifications are highly unlikely to hold water. It is up to the tenant to identify these issues whilst drawing up the heads of terms so that if there are any justifiable exceptions they can be written into a legal contract. And if the office is not newly refurbished and in pristine condition, then the tenant must identify this and get an upfront agreement stating the exact condition of every surface (walls, ceilings floors etc), fixtures and services, and what measure is going to be used in order to determine how everything is going to be reinstated back to the same condition.  This is not simple because, for example, the landlord might have left in place expensive carpet tiles which are in good condition but not new. After 3 to 5 years further use, it is most likely that these carpet tiles will be showing considerable wear, so what is the landlord expecting the tenant to do when they move out?  Do they replace them with exactly the same brand and colour in the same ‘nearly new’ state they were found – unrealistic and almost impossible – or are they expected to replace them with brand new carpets, and if so, do they need to be the same tiles or can they be a budget range?  Or do they simply come to an up front agreement that because they are not new and that it is impossible to therefore replace like with like, that an agreed settlement fee will be charged upon exit?   So, defining and setting out in writing at the outset exactly what is required at the end of the term is essential.

If you are planning on doing anything that you consider will be a significant improvement to the office space, and that will be beneficial to the landlord in helping them to re-let it after you have moved out, then again this is something you must identify upfront and tie into a written agreement – either that you will not be required to remove these items, or perhaps that they will be allocated a monetary value that will be deducted from the dilapidations bill (although in such circumstances it would be more normal for the landlord to make an up front contribution towards such works.  The sort of things that might qualify here would be the provision of (if not already in place) underfloor electrak power distribution systems, floor boxes, new and improved ceiling lighting and significantly improving wall and ceiling surfaces (perhaps re-plastering, drylining etc) if in a poor state initially.

Here’s another very important factor to consider.  More often than not you simply won’t have time to carry out any dilapidations works yourselves. These works can not take place whilst you are still occupying the space, and although  you might have all best intentions to leave sufficient time between moving into you new office and the lease-end date for the existing office,  most often it goes down to the wire and the two dates coincide.  Once the lease has officially ended, the landlord is highly unlikely to let your contractors back in for a few weeks (or even a few days) to carry out works and that means that you’re going to have to pay the landlord a settlement fee which is likely to be considerably higher than what it might have cost you if your own contractors had done the work.  Furthermore, even if you do manage to get the work done yourselves, you have to be absolutely sure that the finished result is exactly what the landlord is expecting (or what is written into the contract) otherwise you could get another bill from the landlord over and above what you have already paid out to your contractors for them having to put it right themselves.  In a nutshell, what I am saying is that when you enter into an office lease, you must consider the worst case scenario and ensure you have the budget to cover it.

So why does everything cost so much and what are those costs? I like to break this down into 2 areas: 1) Wear and tear or damage to landlord provided fixtures, fittings & services and 2) alteration works or additions that you have carried out.

Let’s look first at the landlord-provided aspect. Your new office is likely to be either Cat A or Cat B, or somewhere in between. Cat A is where the landlord has provided a base or basic fitout – basic in this case meaning essential services-only but not necessarily low cost or inferior quality. The essential services can, and very often are, done to a very high specification. For instance, it might have brand new high spec lighting and air conditioning, a new raised access floor and newly decorated walls and ceilings. Whatever you do with the office thereafter, however you might alter it or use it, you will normally be required to bring it back to exactly the same basic but quality state at the end of the lease. This would involve stripping everything out that you’ve put in, repairing (making good) any damage, and replacing any worn or damaged original fixtures and fittings so that it is ‘as new’. Normal wear and tear is usually not considered a ‘get-out’. You will have entered into a legally binding contract and agreed to replace or repair pretty much everything.

Any additions or changes that you make to the space during your own fitout would need to be removed and/or put back as originally presented.  A typical example would be the occupier  spends tens of thousands of pounds installing glass  and solid partition walls, expensive carpet tiles and floor coverings, new lighting and much more, only to find that the landlord demanded that they remove it all, make good all the decorations and replace the carpet tiles with new carpet tiles of the same specification that was in place when they moved in.  The outgoing occupier argues that they have made great improvements to the office so surely they should not be penalised for this.   The landlord argues that even though the tenant replaced the original carpet tiles with much more expensive ones,  they are now 5 years old and are showing signs of wear, whereas the carpets he fitted prior to their occupation, albeit of an inferior quality, were brand new. He will also argue that the layout of partitions is bespoke and is unlikely to suit another company’s needs, so it will make it more difficult to find a new tenant.  The landlord does not want to foot the bill for stripping out and making good the office, and nor does the incoming tenant, so the onus is on the outgoing tenant to make things right at their expense.

So is this fair? Not always, but if that is what is in the legal document, that is how it must be.  The main point I want to make, particularly to SMEs who may not be quite so experienced in these matters, is that the cost can be vast and run into £10s or £100s of thousands, so please, be careful!

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