Finance: Social enterprise development hit by lack of affordable offices

Social enterprises are struggling to pay for suitable premises because they rely on short-term contracts, a recent study by the London Social Economy Taskforce has found.

Of the 470 London-based social enterprises that took part in the survey, almost 50 per cent said they had less than five years left on their tenures and were unsure of where to go next. Many respondents described the Catch-22 situation of being unable to develop without more space to work in, but being unable to acquire property without the promise of future expansion.

Some described having to use their own homes as security when acquiring office premises for their fledgling enterprises.

"When you negotiate a lease, owners want a deposit, but it's difficult for us to come up with that sort of sum," said Sophi Tranchell, managing director of Day Chocolate, the firm that produces the fair trade brand Divine. "Directors of social enterprises often work as volunteers - you can't expect them to put their houses on the line."

Robin Jones, chairman of LSET's property and community assets sub-group, said: "Many social enterprises are so small that they rely on short-term contracts, thus missing out on premises that are better value and of higher quality in the long term."

Jones added that owners of commercial property in areas that are due to undergo major redevelopment are reluctant to sell. "In east London, people are tending to hang on to commercial property because of its 'hope value'," he said. "They think it will accrue greater value in the future, but this is a particular problem for social enterprises with a particular retail focus that may be tied to certain locations."

Alibeth Somers, former director of policy and research at Social Enterprise London, said the biggest hurdle enterprises faced was an inability to prove their financial credentials to banks and mortgage brokers.

"Social enterprises want to retain profit, but they usually reinvest it at the end of the year, so they don't have money remaining on their balance sheets," she said.

One solution comes from Mezzanine 2, a social enterprise that sets up communal workspaces for social sector organisations in London.

Kirstin Ross, business manager of Mezzanine 2, which was established by the Community Action Network, said: "It is traditionally hard for social enterprises to find decent offices and back-office support that have suitable access to transport links.

"We are trying to provide high-quality, cost-effective premises for shared networking."

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