Serviced Office Review: East Midlands Q4 2009
Serviced Office Review: East Midlands Q4 2009
The following report utilises statistics for Q4 09 from
officebroker.com, the UKΓÇÖs leading independent broker
of serviced office space, along with external reports to
present findings on activity within the serviced office
industry in comparison to Q4 08.
The report presents results on the following key areas in
the East Midlands region:
In terms of the number of enquiries, the size
and shape of those enquiries and the number of
workstation prices and initial license length
Using the statistics from these areas, a detailed
overview of the serviced office industry in the East
Midlands was compiled to provide a comparative
analysis of the changes within the serviced office
market during Q4 09.
added to the officebroker.com
portfolio in 2009
Q4 09 compared to Q4 08:
Enquiry levels remained
office tenants (SOTΓÇÖs)
price dropped to ┬ú211.00
peaked at 5.9 months –
- SUPPLY OF SERVICED OFFICE SPACE
added to the officebroker.com
portfolio during 2009, representing a
+ 24% increase in the total number of
serviced office buildings available.
The total number of serviced office buildings reached
102 in the East Midlands during Q4 09. This peak
figure followed 4 new offices being added to the
officebroker.com portfolio during Q4 09.
The 4 serviced office buildings added in Q4 09 were
part of 24 buildings added during the entirety of 2009.
These additions represented a 24% increase in the
total number of serviced office buildings available
within the East Midlands.
According to commercial property agents DTZ***,
prime office rents for conventional space in
Nottingham dropped as low as ┬ú17.95 during 2009.
Such a decrease could have contributed to an
increase in serviced office providers seizing the
opportunity to lease new buildings for conversion to
Securing a financial return on such investments would
be dependant on a rise in both demand and average
workstation costs, both areas that have nationally
decreased in 2009.
The upward levels of supply slowed between Q3 and
Q4 after sharper increases in Q1 and Q2. It is unclear
what brought about this fading in the latter half of
2009, but with the +21% increase registered overall in
2009 it would appear serviced office providers have
new space to accommodate any increased uptake
that may occur.
- DEMAND FOR SERVICED OFFICE SPACE
1% of Q4 08 levels
The number of new enquiries received for serviced
office space remained largely unchanged during Q4
09, a continuation of the pattern witnessed across the
three previous financial quarters of 2009.
Although variations in enquiry levels occurred monthon-
month, the overall effect was to return enquiry
levels to within 1% of those recorded during Q4 08.
This pattern of consistency also matches the national
average recorded during this same period, which also
remained within 1% of Q4 09 levels.
So what does the unchanging nature of enquiry levels
in the East Midlands suggest about the state of the
serviced office market? Well, given the expected
impact of recession, the maintaining of enquiry levels
suggests that demand and interest has remained
consistent amongst businesses within the East
Midlands. This could suggest that the region will be
well positioned to respond as the UK continues to
move out of the long-lasting recession. Alternatively
the unchanging nature of demand could suggest a
static market with little room for future growth.
- NEW SERVICED OFFICE TENANTS (SOTS)
The total number of new SOTΓÇÖs fluctuated month on
month compared to Q4 08 culminating with an overall
increase of +9%. Such fluctuations reflect similar activity seen in this
area during the previous financial quarters of 2009,
ending with an annual decline of -11% in the total
number of SOTΓÇÖs.
This annual decline, despite the +9% growth of Q4
09, tells us that although enquiry levels have remained
stable, as highlighted in the previous section of this
report, the conversion rate has fallen.
Such a fall points to a shrinking market for serviced
office space within the East Midlands, perpetuated by
its failure to attract new enquiries and convert existing
ones. This situation could be made all the more acute
given that the number of serviced office buildings has
increased throughout 2009, a factor which would
spread an already thinning market further.
- AVERAGE WORKSTATIONS PER SOT
reached 2.6 ΓÇô Down – 41% on Q4 08
Another area of the market which experienced a
decline during Q4 09 was the number of workstations
being taken by new SOTΓÇÖs.
In Q4 08 new SOTΓÇÖs entering the market took on
average 4.4 workstations per placement, but in Q4 09
that number had fallen by -41% to create an average
workstation take-up of 2.6 per new SOT.
This near halving of workstation take-up again
points toward a declining market for serviced office
space in the East Midlands. Decreases in workstation
take-up also occurred in previous financial quarters
of 2009. If we also take into account the overall drop
in SOTΓÇÖs witnessed in these periods, it becomes
clear demand and take-up have both suffered heavily
One explanation to these trends could be that the
new SOTΓÇÖs entering the market are predominantly
start-up ventures. With start-ups naturally requiring
smaller workstation requirements, this could explain
why workstation sizes have fallen so significantly.
Alternatively the cut in workstation requirements could
demonstrate the scale of downsizing taking place as a
result of the economic downturn.
A common thread throughout however is that
the trend for smaller workstation requirements shows
no sign of altering within the East Midlands. As such
service office providers may increasingly come under
pressure to re-configure office templates in order to
match this demand.
Whatever the reason, the 41% decline seen during
this period suggests a need for office providers to
re-evaluate the importance of smaller clients. While
previously it may have been more desirable to focus
on clients with larger requirements, the results from
Q4 09, which reflect a trend also witnessed in Q1-Q3
09, suggest that smaller workstation requirements will
continue to dominate the market for the foreseeable
future and office providers will need to address this
change in habit.
- SERVICED OFFICE SPACE COSTS
┬ú211.00 from ┬ú222.00 in Q4 08
Despite declines in other areas the impact upon the
average price per workstation in the East Midlands has
been minimal, falling only -5% below Q4 08 levels.
A month by month comparison of Q4 09 reveals that
average workstation costs remained below 08 levels
during October (-10%) and November (-5%) before
rising marginally above 08 levels in December (+2%).
The average workstation cost of ┬ú211.00, despite
being ┬ú47.00 below the national average of ┬ú258.00
recorded for Q4 09, represents one of the smallest
changes in this area of any UK region. With only
a -5% decrease the East Midlands compares
favourably to the nationwide average of -10% and to
that of areas such as the West Midlands (-25%) and
even Central London (-18%).
This continued drop however, while positive for
buyers entering the market, could mean a long
period of recovery will be needed for the serviced
- INITIAL LICENSE LENGTHS
to 6.3 months – 17% down on Q4 08
New SOTΓÇÖs are signing initial licences averaging 6.3
months in Q4 09, 1.4 months (-17%) shorter than in
the same period in 2008.
In light of the declining workstation costs of Q4 09,
it would be reasonable to assume that tenants may
have looked to take advantage, securing longer terms
at more favourable rates. The 1.4 month decrease
(-17%) in licence lengths however suggests this has
not been the case.
One possible explanation could be a reluctance by
business owners to over-commit, particularly with the
harsh lessons of a recession still fresh. This reduction
in commitment levels could suggest that businesses
are unsure about their prospects in 2010.
A secondary explanation could be the direct influence
of office providers. If a recovery is to happen in 2010,
then allowing occupants to secure terms beyond
Q3 10 may be counter productive. By encouraging
occupants to reduce initial licence length, providers
are ensuring the opportunity to renegotiate rates at an
earlier juncture. This would allow current market rates
to be introduced, creating an environment where profit
levels could be raised in line with market demand.
When taking into account all the information for Q4 09,
the following key findings can be drawn:
tenants increased during the financial quarter
but declined annually.
requirements continue to dominate,
suggesting that streamlined operations
have been adopted.
but proved more favourable in the region than
in the UK as a whole.
capitalise on the lower rates available from
serviced office providers.