Falling Office Space Costs Result in Commitment Rising
The cost of serviced office space throughout the North East fell to record lows during the first month of 2010, leading to a substantial increase in the length of licenses being signed by tenants as they seemingly looked to capitalise according to officebroker.com statistics.
While in the closing quarter of 2009 the average cost charged per workstation by office providers was ┬ú196.00, only one month later as January closed the average price had fallen by – ┬ú73.00: leading to a record low of ┬ú96.00 per workstation.
As if in response to these price decreases, those serviced office tenants entering the market during this period have driven a noticeable increase in the length of the initial licenses being signed. Rising from 7 months in Q4 09 (And 6 months during 2009 as a whole) to an average of 12 months during January 2010.
This shift, while positive for those tenants agreeing terms on office space during this time, will do little to help office providers who now face a period in which long term tenants will be paying minimal rent ΓÇô particularly frustrating for office providers if the market does recover and the higher rent associated with this can not be collected until 2011.
Another possible reason for the decline in the rent charged per office workstation may be the influx of new serviced office providers witnessed during 2009. Totalling 64 new centres across the North East, this 60% increase in supply levels may have driven competition amongst office providers resulting in rent per workstation costs decreasing as they sought to attract clients.