Serviced Office Review: East Q4 09
Serviced Office Review: 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 region:
ΓÇóSupply of and demand for serviced office space
– In terms of the number of enquiries, the size
and shape of those enquiries and the number of
ΓÇóNew Serviced Office Tenants:
– In terms of workstation prices and initial license
Using the statistics from these areas, a detailed overview
of the serviced office industry in the East was compiled
to provide a comparative analysis of the changes within
the serviced office market during Q4 09.
ΓÇó13 new serviced offices
added to the officebroker.com
portfolio in Q4 09
ΓÇóEnquiry levels decrease -17%
ΓÇó+ 12% rise in new serviced
office tenants (SOTΓÇÖs)
ΓÇóAverage workstations per SOT
peaked at 3
ΓÇóAverage workstation price
dropped to ┬ú228.00 p/m from
ΓÇóInitial license agreements
decreased to 6 months –
SUPPLY OF SERVICED OFFICE SPACE
ΓÇó13 new serviced offices added to
officebroker.com portfolio in Q4 09
The total number of serviced office buildings reached
182 in the Eastern region during Q4 09. This peak
figure followed an addition of 14 new offices being
added to the officebroker.com portfolio during Q4 09.
Those 14 serviced office buildings added in Q4 09
were part of 44 buildings added during the entirety of
2009. These additions represented a +24% increase in
the number of serviced office buildings available within
the Eastern region of the UK.
As demonstrated by Fig.1 the influx of new serviced
offices was continuous with a marginally steeper
rise taking place at the beginning of Q2 and running
through until the close of Q4.
Such an increase could suggest that serviced office
providers are expecting demand to increase in 2010,
leading to the establishment of new business centres
in order to accommodate this.
Establishing such centres may also have become
increasing more attractive to serviced office providers
as a result of a drop in prime rent levels on commercial
DEMAND FOR SERVICED OFFICE SPACE
ΓÇóEnquiry levels decreased by -17%
in Q4 09
The number of new enquiries received for serviced
office space decreased by -17% in Q4 09 and
followed drops averaging -9% in the three previous
financial quarters of 2009. The 17% decrease of Q4
09 marked the largest such decrease.
As shown in fig.2, enquiry levels remained below Q4
08 levels on a month-by-month basis during Q4 09.
The decline in enquiry levels is a trend witnessed
nationally throughout Q4 09, with areas such as Wales
experiencing decreases as large as -30% below the
Q4 08 levels.
In comparison to the national average of <1% recorded for this period however, the -17% shown in the Eastern region of the UK does little to suggest that the serviced office market has attracted increased interest as a result of the economic downturn.
NEW SERVICED OFFICE TENANTS (SOTS)
ΓÇó+ 12% increase in new serviced office
The number of new SOTΓÇÖs rose by +12% in Q4 09
compared to Q4 08. This rise occurred following
a +33% increase in October and a further +18%
increase in December.
Growth in Q4 09 represented the first rise in SOT
levels during 2009, with Q1-Q3 each registering a -9%
deficit on Q4 08 levels.
This return to growth coincided with the UK economy
finally exiting its long-lasting recession. Suggesting
that as confidence began to grow so did the number
of new businesses entering serviced office space.
The rise in SOT levels came despite the lowest 2009
enquiry levels being received during Q4 ΓÇô again
suggesting that business owners felt more confident in
moving their plans forward during Q4 09.
AVERAGE WORKSTATIONS PER SOT
ΓÇóAverage workstations per SOT
reached 3 ΓÇô down from 3.7 in Q4 08
The overall increase in new SOTΓÇÖs during Q4 09
corresponded with a decline in workstation take-up.
At the close of Q4 09 the average number of
workstations per SOT was 3.0, a decrease of -19% on
the 3.7 workstations being opted for during Q4 08.
A month-by-month analysis shows decreases in
October (-10%) and November (-37%) before a partial
recovery toward Q4 08 levels in December (-4%).
Smaller workstation requirements have become
a trend throughout 2009, reducing in the East of
England by an average of -12% between Q1-Q3 09
and nationally by -18%.
One explanation to this trend 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 smaller
workstation requirements show no sign of altering
within the East in the immediate future. As such
service office providers may have increasingly come
under pressure to re-configure office templates in
order to match this demand.
SERVICED OFFICE SPACE COSTS
ΓÇóAverage price per workstation fell to
┬ú228.00 – Down 25% on Q4 08
Another influencing factor on the rise in new SOTΓÇÖs
may be the competitive prices being offered by
serviced office providers during this period.
During Q4 09 the average price per workstation fell
to ┬ú228.00 p/m from ┬ú306.00 p/m in Q4 08. This
contributed to the -15% decrease in workstation
prices experienced annually in the East during 2009.
A month by month comparison of Q4 09 reveals that
average workstation costs have fallen below Q4 08
levels in both November (-51%) and December (-6%)
while October (+6%) registered a small increase.
Looking at the quarter, it is clear that the majority of
the -25% price change recorded in Q4 09 occurred
because of the figures recorded in November 08.
A series of high value deals took place during this
month, which in turn corresponded with a rise in
the average number of workstations (Fig. 5). It is the
absence of these larger deals which has affected
the average cost per workstation during Q4 09. It
is possible that if the number of SOTΓÇÖs continues to
increase beyond Q4 09 the subsequent squeeze on
supply will bring about a rise in workstation costs. In
addition, as the economy once again begins to find
its feet, it may lead to a rise in the higher workstation
demands that accompanied the increase workstation
costs on 08.
The national average workstation cost for Q4 09 was
┬ú258.00, placing the Eastern region ┬ú30.00 behind.
INITIAL LICENSE LENGTHS
Initial license length commitment falls
to 6.2 months – 37% down in Q4 09
New SOTΓÇÖs are signing initial licences averaging 6.2
months in Q4 09, 3.7 months (-37%) shorter than in
the same period in 2008.
In light of the falling workstation costs in Q4 09, it
would be reasonable to assume that tenants may
have looked to take advantage, securing longer terms
at more favourable rates. The 3.7 month decrease in
licence lengths however suggests this has not been
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:
ΓÇóEnquiry levels have fallen
ΓÇóThe overall number of new serviced office tenants
rose during the financial quarter ΓÇô suggesting an
influx of new businesses into the serviced office
ΓÇóLarger workstation requirements remained
absent from the market ΓÇô suggesting that smaller
requirements will continue to dominate
ΓÇóAverage workstation costs continued to fall
ΓÇóInitial license lengths fell as SOTΓÇÖs failed to
capitalise on the lower rates available from
serviced office providers