Rise of virtual offices cuts into conventional leases

In the troubled world of commercial real estate, where available space far exceeds what is currently needed, landlords have another reason to reach for the antacids:

Demand is growing for virtual offices.

That's not a patch of beach where you plant a chair, crack open a cold one and your laptop, and declare yourself "at the office."

A virtual office is shared work space - meeting and conference areas, reception desks, copy rooms - used on an as-needed basis, at a cost that could be considerably less than rent under a conventional multiyear office lease.

It includes shared support services, too. Depending on the provider, that could mean a receptionist along with a team of administrative assistants to help develop marketing plans, create business cards and brochures, even assist at trade shows.

And sometimes, just a stiff drink is in order. At American Executive Centers' virtual-office facility in King of Prussia, manager Gwen Bonsall Donnon dipped into the office-party stash one day to come to the aid of a client who declared after a rough day: "I need a rum and Coke."

Donnon also is keeper of the props. In her office, among other things, is a box of framed photos belonging to one of the virtual-office clients. She puts them out when he visits, to help personalize his rented space.

"We even put trash in the trash can so it looks like he's been in there," she said.

The Philadelphia region has at least five virtual-office providers offering a range of space - even in such posh addresses as One Liberty Place - and services. Costs range from at least $60 a month (for a corporate address to which mail can be sent) to $460 a month.

At American Executive, believed to be the region's largest locally based virtual-office provider (seven facilities), business is up 75 percent over the last year, said president G. Michael Howard. Lawyers account for 30 percent of new clients; entrepreneurs and start-up companies make up an additional 25 percent.

And for the first time in its 27-year history, Howard said, American Executive's virtual-office clients outnumber conventional tenants, 550 to 375.

For years, virtual-office users were typically global companies wanting a place to hold meetings during temporary visits.

But the concept's appeal has grown recently, in large part because of the recession, said Bruce Bard, owner of Intelligent Office, a virtual-office operator in Marlton with about 135 clients.

"When the times get tough, people look to drop their overhead expenses - to work from home or find cheaper alternatives without losing their professionalism," Bard said.

Nancy Fox, general manager of The Office Works in Trevose, called its virtual offices "the hybrid space between a post office box . . . and an actual physical office" secured by a long-term lease.

"It's a way to take that step forward during these hard times for people who are afraid to spend money," Fox said.

Owners of three local businesses with virtual offices shared their experiences last week.

Brian Lureen still leases 2,500 square feet in Malvern's Great Valley Corporate Center for $5,800 a month.

But a year ago, the 47-year-old president and chief executive officer of Heritage Fincorp Inc., a wealth-management company, added through American Executive virtual-office space at the Radnor Financial Center for a monthly base price of $330. Some services are extra.

So satisfied is Lureen with the results - he has been able to expand his business reach to other markets without the expense of a conventional office lease and hiring more office staff - that he is about to enter into a second virtual arrangement. It will be with Executive Office Link Inc., of Malvern, where American Executive does not have a presence, but where Lureen has a home.

Why not just have a home office? The need for some space between his personal and professional life.

"I want to separate my house from clients and regulators," Lureen said.

At home, he also would not have the Radnor Financial Center's stunning decor: marble lobby floors, soaring skylights, lush garden boxes, soothing fountains.

"The virtual office enhances not only your business model, but also your professional image."

Brian Pradon set his laptop on the cherry desk before him, contributing the sole personal touch to his virtual office in King of Prussia. The walls were bare, but for an American Executive Center-provided framed picture of the Great Wall of China bearing an inspirational message: "Teamwork. Many hands. Many minds. One goal."

Pradon shrugged off the austere surroundings. Personal effects, he said, belong "at home. Now, I'm on work mode."

At 31, the Valley Forge resident is operations manager for his family's Mack Employment Services, a staffing company with headquarters in Reading. It has five branch locations: Lancaster, Allentown, Harrisburg, Ephrata, and King of Prussia, the latter being the only virtual office. If such an option were available in the other markets, Pradon said, he would switch to it.

Converting from a traditional office lease to a virtual arrangement has saved his company about $1,800 a month, "which, to a small company, is significant," he said. That is especially true for his, he added, since Mack's business dropped 35 percent from 2008 to 2009.

In Pradon's virtual office, for $205 a month, his calls are answered and rerouted to him if he is on the road. His mail is collected. Packages are signed for. Copy machines are just across the hall - and bagels and cream cheese are served every Friday.

"You have what you need to do the job," Pradon said.

Carole A. and Brian P. Cleere are virtual-office novices. On Feb. 1, they cut the cord on their conventional office, at the Wynnewood Shopping Center for the 23 years they have practiced law together.

They have jettisoned an $1,700 monthly rent and the hassles of maintaining an office with a staff of "one-and-a-half people" to answer the phone and handle some secretarial work.

In exchange, the Cleeres said, they have gained access for $330 a month (plus incidentals) to more extensive support services than they had, including paralegals, and more impressive digs - a 15,000-square-foot suite of meeting rooms and accessory areas on the third floor of a nine-story office building just off City Avenue.

"A stepped-up image" is what Brian Cleere, 71, called it, minus two staples of law-firm interiors - framed law degrees on the walls and shelves of brainy books.

Legal journals are so yesterday, it seems, replaced by online research opportunities. As for the professional certificates?

"They are in my home office, so I feel protected," Brian Cleere said. "My ego is still there."