Press
Services office suites swell
A serviced office used to indicate a poor-quality business space suited only to those at the bottom of the corporate pile. But the sector has seen rapid expansion and transformation in the past decade. The amount of “flexible space" on offer - at least in the UK's major business centres - will come as a shock to those who cling to old stereotypes.
Tim Edghill, regional director in Jones Lang LaSalle's corporate finance team, believes that the sector's past and anticipated future growth is a reflection of changing business patterns - all driven by the need for flexibility on a global scale.
He says: “If you look to the US as an example, IBM, by the end of last year, already had four out of 10 workers with no fixed desk. The technology companies are leading this change, trying to get closer to their clients, and they are being copied by management consultants."
Edghill points to Regus, the world's largest serviced office operator, and its Network Access programme, which grants subscribers unlimited access to 950 “business lounges" in 400 cities and 70 countries. “It is not just a location at a desk," he says, “you are plugging into facilities and a procurement base, whether you are a small business or a global corporation."
Alliance Business Centres, a US firm with 600 offices in 36 countries, perhaps best represents the move to so-called “hotelling" of business space. Through ABC, it is possible to call one number and book office space in any country from Dubai to Venezuela - by the hour, day or year.
However, the market's new demands are not just about flexibility of location - companies are also demanding flexibility in the type and quality of space provided.
AIM-listed Stonemartin is one serviced office operator with a model that provides clients with an alternative to homeworking that stops short of being a fully serviced office. Its Space2Share concept occupies 69,000 sq ft of a 122,000 sq ft building in Reading, Berkshire.
Tangible space
Head of regional sales Paul Spencer says: “The old virtual office used to be just a mailing address, some way of buying a prestigious office that wasn't your real home. That has moved to something more tangible - a complete office start-up from stationery packs to desks, where you need them, on a just-in-time basis." Furthermore, costs are about 35% those of conventional serviced office space.
Clients receive a full mail-handling and secretarial service and, in addition, can work in secure shared office space, including full PC and internet access, for up to 30 hours a month. They also have access to facilities such as a kitchen, as well as the Institute of Directors' lounge, provided through Stonemartin's link with the organisation, which can be used for meetings and other events.
Local value
Spencer says: “This isn't the future of the whole sector, but there is an increase in project-based assignments. People want to put touchdown teams in locations, but are aware that they may have cost-sensitive clients."
As the market matures, so it is beginning to segment in terms of quality. Executive Offices Group runs 33 centres in the , but its name appears on none of them. Instead, it runs three brands: Argyll, a luxury boutique townhouse offering concentrated in London's West End its “business class", Palladia, distributed across the and the “midmarket" Corpnex. Prices range from £700 to £2,000 per person per month.
Sales director John Drover claims that this strategy makes Executive Offices unique in the market. “We run the idea of different brands for different positions within each market," he says. “We are the only company with ownership of a large chunk of buildings, as opposed to leasing them, and we are the only one with a luxury brand as well."
His occupiers include mining companies and private equity firms, as well as the public sector - inward investment companies, offering incubation facilities, are among the most significant takers of serviced office space.
Drover adds: “As Europe becomes more unified, it is more onerous to hire people. Companies are seeking to outsource as much as they can. We provide the back office - secretarial space, administration personnel and facilities management. They can then work in smaller and smaller groups."
Nevertheless, despite this optimism for the future, some landlords remain wary of serviced offices, believing that these operators will bear the brunt of any slowdown or recession. But many in the sector say that its record is partly a result of its exposure to the dot.com crash. Executive Offices, for example, is wholly owned by the Morgan Stanley Real Estate Fund, which insists that its tenant base is balanced.
Edghill believes that the market has considerable room for growth. He says: “I don't think there is anything like enough serviced office space in the to suggest that there would ever be a price war if there were a slowdown."
“Less than 1% of office space in the is serviced or flexible. In the that figure is around 15%. That gives you an idea of the scale of difference between the two markets. There is clearly an opportunity for significant growth."
David Alberto, managing director of Avanta - which has more than 300,000 sq ft of serviced space across seven locations - adds that much of this potential for expansion is in the middle range.
He says: “Every corporate I know does not want to take a 10- to 15-year lease they do it because it is the only [available] choice they can take."
He adds: “The top end of the serviced market - the five-star buildings in five-star locations - is a relatively finite market. I see the three-star market growing for the foreseeable future. Companies would rather pay for what they need when they use it."
8th September 2007- Estates Gazette