Guiding Operators and Occupiers in a Hot Market
OPEN FOR BUSINESS
The central London market for serviced/flexible offices is not just the largest in Europe but is the largest city market globally. As such you would think that new operators both domestic and overseas would be wary of getting involved in a crowded marketplace. Not so, the number of operators continue to increase, all aiming to offer something a little different, to stand out from the crowd.
It is the new operators to the UK who have quickly cottoned on to the fact, that despite the fast-paced growth of the market – a new entrants’ reach is limited. The best way for them to get their product out there, is to use channel introducers – this ensures they reach a wide client base quicker than they could independently.
For some new entrants’ the need for market education is required and that is where the advisors come into their own. The same can be said for the businesses looking for flexible space too.
ON THE OCCUPIER JOURNEY
The UK and in particular London is different to that of other global cities, largely due to the established nature of the market. Both tenants and flexible office providers rely on the in-depth market knowledge of commercial agents, who specialise in flexible leasing advisory to navigate the complexities of securing the right deal for the right business. Commercial advisors will be there at each step of the way.
More recently with the change in the IASB accounting standards effective on 1 January 2019, businesses will no longer be able to show lease rental payments as an overhead. The cost will be recognised as a depreciation item. As a result we are advising occupiers of all sizes who are cognisant of these issues – sourcing for them bespoke all-inclusive packages in both managed and fully serviced spaces, which fall outside of the IASB changes. This is how being on a workspace journey with a client can achieve long-term cost savings and ensure their workplace is fit for purpose.
So far this year we’ve seen a significant emphasis on workplace efficiency from corporate occupiers increasingly
aware that it is not how much space that is apportioned but rather how that space works and functions for them. Those tasked with choosing the internal environment for their workforce are now more often than not, shifting focus to approximately 25% less sole use space per employee in favour of a better design strategy, such as multi-purpose designed meeting rooms, clever use of partitioning and sound attenuation and collaboration pods. Choosing to then use the large communal areas to exchange ideas and establish key business connections.
The client base for serviced and flexible offices has changed dramatically over the past five years and now covers a wide range of business types and sizes and the space needs to suit. Rather than immediate plug and play space, bespoke space solutions are being sought after with increasing frequency. The incoming business is wanting more of a say on the look and feel and layout than ever before.
A GOLDEN HELLO TO NEW OCCUPIERS
As the number of operators and centres have continued to grow in central London, it is not just the weather that has been heating up, so too has the competition for tenants. Recently, key workspace providers have offered enticing client incentives of up to six months’ rent free (subject to conditions) in selected buildings. A loss leader perhaps, but a sure way to stimulate occupancy levels in newly opened centres and a move they trust will pay off through confidence in service delivery and ultimately achieving occupier loyalty.
WHAT TO EXPECT IN H2 2018
Obviously, the summer sale from some operators will ensure that a number of occupiers will bag themselves a bargain. Yet the outlook for rental prices will continue to be a moveable feast. Unlike leasehold pricing which is more regulated and dictated by the market, serviced/ flexible pricing varies monthly due to a number of factors.
While the location is a large part of the pricing composition, building quality, fit-out, furnishings, the extent of service provided will all determine the cost. Yet it is the centre occupancy level that will be a large determinant, akin to hotel room availability. So, with an increase in operators, centres and incentives opening up over the coming months, we could see some generous rates being achieved.
Especially more so as we see the rise of East London – Hackney Wick, Stratford and London Fields moving into the spotlight with a number of operators exploring opportunities to expand into these gentrified areas – dubbed as the next ‘Shoreditch’, space there is becoming attractive for those wanting to maximise on value for money, be a part of their space design from the outset and benefit from the proximity to central London.
Finally, the opening of the much-awaited Elizabeth Line (central section) at the end of the year will increase the market (geographically and price-wise) for operators and occupiers alike. New East London centre openings in 2019, I predict!
FLEXIBLE OFFICE CLIENTS - A SELECTION OF THE CLIENTS WE HAVE WORKED WITH IN H1
Gemma Foord, Director, Serviced Office Agency