Cranking Up the Service
Its space but not as we know it. Or at least, not as we have known it. Historically, serviced offices have gained a reputation for offering average accommodation in sites off the beaten track, and of providing little by the way of real service, but many chargeable extras.
But over the years that perception has changed as professional operators such as Regus and Evans Easyspace have entered the market and introduced professionalism, flexibility and, crucially, better locations.
There is now a feeling that serviced offices are in a good position to play a more central role in the commercial property market. Not least because in a difficult economic environment it may make more sense to rent property on a short-term contract basis rather than commit to a long lease.
Yorkshire’s Evans Easyspace now manages 50 business centres across the UK including serviced office centres in Leeds, Harrogate and Wakefield.
Managing director Tom Stokes argues the time is right for serviced offices. He believes that to survive in the current climate, businesses must look at ways to cut down on their outgoings, and choosing flexible premises is one key way of achieving this.
“The key selling point is that they are let on flexible terms. That’s their strength in this particular market,” he says. “There is less risk with people like us. If the economy did deteriorate you can reduce risk and downsize.”
Serviced offices tend to cater for small businesses of between three and 20 staff and are typically based on 75 sq ft per person. What is on offer depends on the particular business centre, but a basic package would probably include office furniture, telecommunications, parking spaces and a receptionist to put through calls and deliver the mail.
Other facilities, such as the use of meeting rooms and so on, may or may not come as an extra.
It has often been argued that serviced offices can work out more expensive compared with leased offices, but Stokes disagrees. “There is a strong argument to say it is more economic to take space in a serviced office because you are not having to pay
for hidden costs.” he says. “It is a total cost of occupation rather than per square foot.”
Either way, Stokes is certain the offering is a lot more professional now. “The industry has matured over the past few years,” he says.
Yorkshire’s office agents have also noticed increased professionalism in the serviced market and are aware of their increasing popularity in the current climate. But they are divided on whether serviced offices are a better option than traditional leasehold space.
Guy Cooke, a partner at Knight Fran! in Leeds, says: “On balance there is a flight towards them if they are well located. People are uncertain and don’t want lease liability on their balance sheet. Flexibility is key at the moment.
“But if you get to a certain size they become bad value. Once you get over 3,000 sq ft they become expensive. It is also hard to compare costs. Operators can be quite cute in how they market costs. But they have raised the quality over the past few years. They are more transparent about what the offer is.”
Nick Baker, associate director of agency and development at Atisreal in Sheffield, agrees. “While serviced offices can be convenient in the short term,” h< says, “they can be expensive and don’t really fit with a long-term business plan that accounts for the changing needs of the occupier’s operations.”
Eamon Fox, associate director at DTZ in Leeds, says: “Occupiers ultimately pa> for the privilege of flexible, serviced accommodation. However, the upside is flexible lease terms, allowing the occupier to focus on what they are good at – the success of their business.
“In the tougher economy, landlords will have to be more flexible on leases, or lose out to the serviced providers. We are already seeing landlords becoming more fluid on this front, particularly for second-hand refurbished product.
“There has been an influx of serviced providers in the region, although it is a competitive market and only the more established players succeed. A high level of resource is required in the background to ensure a successful operation, which cannot be provided by all.
“DTZ let 26,000 sq ft to Regus at Wellington Place in Leeds last year and it has continued to do very well, with an impressive occupier line-up. Equally, Bruntwood provides serviced accommodation at West One on Wellington Street, also in Leeds, and its offering is the benchmark others follow. Bruntwood has a strong customer-facing team, ensuring occupiers’ needs are met.”
Kevin White, a sales surveyor at Bruntwood, agrees customer service is key to its success. “Our business model is based on long-term relationships,” he says. “West One is an example of that. We have more than 100,000 sq ft of space that we have let on serviced, managed and traditional leased terms.
“We can provide for any requirement from one hour up to 25 years. We aim to incubate our customers through their uncertain stages or periods of growth in our flexible serviced space, and then provide them with a longer-term solution ideally under the same roof but at worst, elsewhere in our portfolio.”
This mix of serviced and leased accommodation may well become the norm, but there are still plenty of opportunities for those who want to remain purely serviced office providers.
Oliver Corrigan, office manager and part of the family that runs the Carrwood Park serviced office centre in Colton, Leeds, says: “We go a long way on being a family business. I have to face the customers every morning.”
Carrwood Park offers 20,000 sq ft of serviced office space around a central atrium, and Corrigan says costs are competitive. “We have open plan space for hot desking that starts at ┬ú75 per person per week. A double person room is ┬ú800 all in per month.”
Corrigan says his company works on blocks of six months and that flexible options are built in. “If the room price is ┬ú2,000 there may be a contract incentive of ┬ú1,800 for six months. Then it could be a 30-day notice period but the price is up to ┬ú2,000,” he says.
That flexibility mantra is certainly resonating with occupiers in Yorkshire. officebroker.com – an online broker for the serviced office sector that works with more than 90 per cent of all UK serviced office providers – says Yorkshire is one of its busiest regions.
Managing director Andy Haywood says: “There is an awful lot happening in Yorkshire. The likes of Evans and Regus are good companies. The market is diverse. Landlords have seen the opportunity and increased their offering.
“In this economy we have found that with bigger size requirements companies have started to put moves on hold and are looking at the serviced managed office route. Not that long ago if you went into a serviced office it was seen as a temporary business. It wasn’t a real business if you couldn’t afford a lease. But serviced offices provide flexibility, and in a slowdown people need that.
He adds: “We place businesses looking to relocate or downsize. It could be a big company looking for project space in Wakefield for six months. It is not just for the small guys.”
Piers Goodall, managing director of DBH Serviced Business Centres, says occupancy levels are growing across its centres. “Flexibility is an important factor for occupiers,” he says. “We are finding serviced workshops and units are proving particularly popular at our Longfields Court site in Barnsley.”
Longfields Court is a 20,000 sq ft office building that has been designed as a business centre. The accommodation ranges from two work station offices up to an open-plan floor that can house up to 90 work stations.
Goodall says occupiers are committing to a longer stay to qualify for incentives, but says larger serviced office provide! like his company can cut down costs anyway. “As an operator of 10 centres we are able to negotiate the best rates for gas, power, cleaning and so on, and these benefits are passed on to the customer. The customer benefits from a fixed monthly amount for the length of licence they sign. This is particular! important with energy prices expected to rise in the next 12 to 24 months.”!