Why are landlords so blinkered about meeting the needs of their tenants? In London part of the reason for this is that a large proportion of commercial properties belong to institutional investors and pension funds. The value of their property portfolios is directly linked to the security of the rental income and the length of the rental commitment from their tenants. If a property has one tenant on a 25 year lease then its capital value is substantially higher than it would be if the same property had ten tenants each on 5 year leases. Institutional investors and pension funds can’t afford to have their property portfolios down valued and so they can’t afford to offer shorter leases.
This is where London serviced office space stands to gain in the current economic climate. Abacus Office Finder has seen a substantial increase in demand over the past 12 months for serviced offices to let in London on short flexible lease terms. The rent per desk that their clients have been willing to pay has increased in line with this demand and rent, in some cases, has almost doubled if the office space is right and the location fits the business. One of the main attractions of a serviced office (ignoring the short lease commitment for a moment) is the flexibility that companies are offered by the serviced office operator. It’s possible to take an office initially for, say, five people but in six months time when perhaps there is an unexpected up, or down, turn in business a company can opt to move to a larger, or smaller, office - probably on the same corridor in the same building with minimum upheaval and no need to change stationary, business cards, telephone numbers etc. etc.
Recent research conducted by Lighthouse Global on behalf of Cushman Wakefield has revealed that despite wider economic woes, most occupiers are still focusing on growth and apparently 25% of occupiers believe that they will be working to a different office model within three years. This is largely linked to lease lengths and greater flexibility wanted by occupiers, so institutional and pension fund investors in commercial property should beware whereas serviced office operators can expect to reap the benefits of this shift in occupier thinking in the future.
Showing posts with label rent. Show all posts
Showing posts with label rent. Show all posts
Monday, 9 January 2012
Thursday, 14 April 2011
Demand for Serviced Offices in London Rises
Could this be what we've been waiting for?
Let’s face it, there’s not been much news to cheer us in the world the past couple of years. Certainly the commercial property market hasn’t been the place we’ve looked if we’ve needed an injection of positive thinking for a very long time!
Well at last there seems to be a glimmer of hope at the end of that very long tunnel. Over the past 30 years operating in the commercial property market here in London I know that I have to plead guilty to having been too much of an optimist in a declining market, and a "Doubting Thomas" in a recovering market. So if you hear me talking positively about a recovery then you should either be shocked or at least sit up and take notice.
The Past
The interesting thing about the serviced office market, in particular, is that over the past two economic slumps we have seen the early signs of economic recovery before anyone else.
Why is this? Well it’s pretty simple really – in the UK the conventional office market has been dominated by institutional landlords who have insisted on very long leases (they used to require 25yrs but this has now reduced to 10-15yrs). As a result, any business decision to open a new office, or to relocate, couldn’t be taken lightly because you were making a significant financial commitment for the next 10-15 years - and no door with a crash bar and illuminated sign saying “this way out”.
Because serviced offices involve no capital outlay, and only a short term commitment, they were a very attractive option in uncertain times and so we saw demand increase well ahead of any clear economic indicators that the recession was over.
The Present
Over the past six weeks we’ve been running a straw poll survey on our website. We’ve asked just one question of all our visitors: “Is there light at the end of the tunnel?”
Here are the results so far:
Ok, I know it’s not very scientific and I don’t exactly hear any champagne corks popping just yet, but whilst I’m still inclined to be a sceptic, there is absolutely no denying that levels of demand for serviced offices, especially serviced offices in London, have increased substantially over the past month or two. The quality of enquiries is higher, the size of those requirements are larger and the budgets that occupiers have in mind are more realistic.
It’s definitely too early to be able to draw any clear picture of the different motivators that are driving the increased demand, but the facts are there for us to see and, personally, I think it’s all about increased levels of business confidence – if I'm right then what we are seeing are the familiar signs of a sleepy but waking economy.
Here at Abacus Office Finder we have all the serviced offices London has to offer on our books. From big to small, cheap to expensive, high profile to back office and new to old. Among other locations, we have Mayfair serviced offices at surprisingly competitive prices and an unusually large selection of serviced offices in the City of London at the moment - a good time to be negotiating on price maybe!
Let’s face it, there’s not been much news to cheer us in the world the past couple of years. Certainly the commercial property market hasn’t been the place we’ve looked if we’ve needed an injection of positive thinking for a very long time!
Well at last there seems to be a glimmer of hope at the end of that very long tunnel. Over the past 30 years operating in the commercial property market here in London I know that I have to plead guilty to having been too much of an optimist in a declining market, and a "Doubting Thomas" in a recovering market. So if you hear me talking positively about a recovery then you should either be shocked or at least sit up and take notice.
The Past
The interesting thing about the serviced office market, in particular, is that over the past two economic slumps we have seen the early signs of economic recovery before anyone else.
Why is this? Well it’s pretty simple really – in the UK the conventional office market has been dominated by institutional landlords who have insisted on very long leases (they used to require 25yrs but this has now reduced to 10-15yrs). As a result, any business decision to open a new office, or to relocate, couldn’t be taken lightly because you were making a significant financial commitment for the next 10-15 years - and no door with a crash bar and illuminated sign saying “this way out”.
Because serviced offices involve no capital outlay, and only a short term commitment, they were a very attractive option in uncertain times and so we saw demand increase well ahead of any clear economic indicators that the recession was over.
The Present
Over the past six weeks we’ve been running a straw poll survey on our website. We’ve asked just one question of all our visitors: “Is there light at the end of the tunnel?”
Here are the results so far:
Ok, I know it’s not very scientific and I don’t exactly hear any champagne corks popping just yet, but whilst I’m still inclined to be a sceptic, there is absolutely no denying that levels of demand for serviced offices, especially serviced offices in London, have increased substantially over the past month or two. The quality of enquiries is higher, the size of those requirements are larger and the budgets that occupiers have in mind are more realistic.
It’s definitely too early to be able to draw any clear picture of the different motivators that are driving the increased demand, but the facts are there for us to see and, personally, I think it’s all about increased levels of business confidence – if I'm right then what we are seeing are the familiar signs of a sleepy but waking economy.
Here at Abacus Office Finder we have all the serviced offices London has to offer on our books. From big to small, cheap to expensive, high profile to back office and new to old. Among other locations, we have Mayfair serviced offices at surprisingly competitive prices and an unusually large selection of serviced offices in the City of London at the moment - a good time to be negotiating on price maybe!
Friday, 28 January 2011
Demand remains surprisingly strong for serviced offices in England's capital city
Demand remains surprisingly strong for serviced offices in England's capital city.
Despite the worst economic climate in most people's living memory, there is still suprisingly strong interest in serviced offices in the City and West End. There's no denying that rents have fallen substantially but, at the right price, many companies are seeing the good common sense of moving into serviced offices rather than signing lengthy conventional leases. In these uncertain times, many companies really don't want to be tied into long leases on fixed amounts of office space which will inevitably be the wrong size for them before the end of the lease. By using serviced offices they are able only to take the amount of space they need right now, knowing that when they need to take on more staff, or maybe contract their workforce, they can simply move into a larger or smaller office within the same building - no change of address, no painful search for new premises etc. In most cases these moves can be arranged over a weekend - go home on Friday and return to your new office on Monday with everything in place for you to get on with what matters most - your own business.
Despite the worst economic climate in most people's living memory, there is still suprisingly strong interest in serviced offices in the City and West End. There's no denying that rents have fallen substantially but, at the right price, many companies are seeing the good common sense of moving into serviced offices rather than signing lengthy conventional leases. In these uncertain times, many companies really don't want to be tied into long leases on fixed amounts of office space which will inevitably be the wrong size for them before the end of the lease. By using serviced offices they are able only to take the amount of space they need right now, knowing that when they need to take on more staff, or maybe contract their workforce, they can simply move into a larger or smaller office within the same building - no change of address, no painful search for new premises etc. In most cases these moves can be arranged over a weekend - go home on Friday and return to your new office on Monday with everything in place for you to get on with what matters most - your own business.
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