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The Serviced Office Market

Serviced Offices

The thought of not knowing how a business will contract or expand over the next seven years makes the concept of flexible space or serviced offices more appealing. This is further compounded when considering the differences in moving-in costs between serviced offices and leased. These issues include: installing communications lines and internet connections, furniture, legal fees, dilapidation costs, full repairing and insuring leases, service charge bills which can continue after the office has been vacated.

UK market

So what is happening in the UK market right now? We can only tell by the availability figures that we are given by the centres and the amount and type of business that we are doing.

Firstly the occupancy levels - these are currently at 77% on average across the whole of central London - this is down slightly as a handful of very large units are currently vacant and influencing the average figures. Several business centres are full. Workstation rates have generally increased.

Secondly, in terms of our business the total number of serviced office enquiries we generate has gone down by almost 5% - comparing the last 6 months with the same period last year. Our overall conversion rate has also dropped by almost 10% but the amount of space sold has increased due to a handful of larger deals.

The nature of demand has polarised over the same period with a relatively healthy demand from the SME's seeking small offices (<5 people) together with a strong demand from Government-related teams for large units (>3,000 square foot). In our view, the demand for large units from the corporate sectors has also begun to increase over the past 3 months or so albeit from a low base.

Managed offices save money, says report

SMEs stand to gain from greater flexibility

24.03.2006

By Sean McAllister

Small and medium-sized office occupiers could save themselves millions of pounds in property costs by moving to managed business space rather than taking a lease on an office building.

So says a new report, Organising the Workplace for Profit: Profit Options for SMEs, which outlines ways in which small and medium-sized enterprises (SMEs) can make operational savings, improve staff retention and productivity and increase competitiveness by handling their property better.

The report is written by Rob Harris, director of Ramidus Consulting, which gives office occupiers advice on property. It is made up of a series of studies, the first of which is to be launched next month, accompanied by a website, www.workplaceperformance.net, and workshops in May and June.

‘Managed and serviced offices can be attractive for SMEs, which have unpredictable or rapidly changing short-term space requirements to accommodate projects, mergers or expansion,' says Harris.

‘They also suit start-ups where growth profiles are uncertain,' he continues. ‘Managed offices allow SMEs to reduce their exposure to property and achieve flexibility through a simple occupational contract,' Harris adds.

The report includes an example of a Manchester-based company that saved £1.85m over three years by choosing managed business space instead of a traditional lease.

‘It has always been the perception that serviced or managed business office space is more expensive,' says Tim Worboys, sales manager of managed office provider Stonemartin. ‘What occupiers don't often understand is that they can make a 15%-25% saving on the space they require because breakout space, kitchens and so on are all provided by the centre. ‘And you need to factor in the total cost of occupying an office. Reception staff, cleaning and depreciation of furniture are all examples of the various costs that are included within a managed business space contract but not within a lease agreement.'

According to Worboys, managed business space also gives SMEs more flexibility, particularly if the provider offers occupiers a ‘just in time' service for changing space requirements.

Managed offices that can provide contiguous space for growing companies provide the best option for occupiers and the greatest savings, he says.

Managed office provider Stonemartin recently helped find office space for a company based in Manchester while it expands over a 30-month period.

The company’s requirement was for 27,986 sq ft (2,600 sq m), so it could eventually house up to 223 people. Under the agreement with Stonemartin, it moved into the Peterhouse offices, initially accommodating 74 staff, but with the option of taking up adjoining office space as and when the company built up to its anticipated staffing levels.

The company saved money by not renting unwanted space in the first year and by using the IT and facilities included in the deal.

Compared with conventional office space costs, Stonemartin estimates the managed option saved the company £1.27m in the first year, £476,000 in the second, and £106,000 in the third. The overall cost saving was put at 46% over conventional space, totalling £1.85m.

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