Serviced Office Review: Scotland Q4 09
Serviced Office Review: Scotland Q4 09
SCOTLAND Q4 09
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 findings on the following key areas
Supply 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 Scotland
was compiled to provide a comparative analysis of the
changes within the serviced office market during Q4 09.
ΓÇó14 new serviced offices
added to the officebroker.com
portfolio in Q4 09
Q4 09 compared to Q4 08:
ΓÇóEnquiry levels decreased
ΓÇó17% decline in new serviced
office tenants (SOTΓÇÖs)
ΓÇóWorkstations per SOT reached
4.2 ΓÇô Up 25%
ΓÇóAverage workstation price
dropped to ┬ú221.00 p/m from
ΓÇóInitial license agreements
increased to 7.9 months
SUPPLY OF SERVICED OFFICE SPACE
ΓÇó14 new serviced offices added to
officebroker.com portfolio in Q4 09.
ΓÇó64 serviced office buildings were
added to the officebroker.com
portfolio during 2009, representing
a 37% increase in the number of
serviced office buildings available.
The total number of serviced office buildings reached
165 in Scotland during Q4 09. This peak figure
followed the 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 64 buildings added during the entirety of
2009. These additions represented a +37% increase in
the number of serviced office buildings available within
As demonstrated by Fig.1 the influx of new serviced
offices was continuous, but the sharpest period of
growth occurring between Q2 and Q3.
The increase seen during the middle of 2009
coincided with prime rents on commercial property
hitting a low of ┬ú26.00 psf in both Edinburgh* and
Glasgow** according to reports issued by DTZ.
Such decrease could have contributed to an
increase in serviced office providers seizing the
opportunity to lease new buildings for conversion
to business centres.
Securing a financial return on such investments would
be dependant on a rise in both demand and average
workstation costs, both areas that have decreased
substantially in 2009.
The upward levels of supply slowed between Q3 and
Q4 after sharper increases between Q2 and Q3. It is
unclear what brought about this fading in the latter half
of 2009, but with the +37% 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
ΓÇóEnquiry levels declined by 8%
in Q4 09
The number of new enquiries for serviced office
space declined -8% in Q4 09, a continuation of the
downward trend recorded throughout 2009. Q4 09
did however represent the smallest decline in enquiry
levels during 2009 with Q1 (-18%), Q2 (-17%) and Q3
(-9%) all showing higher rates of decline.
And while Scotland is not the only area to show a
decline in this area, the addition of ever decreasing
new serviced office tenants (SOTΓÇÖs) and falling
workstation costs, as detailed later in this report,
suggests ScotlandΓÇÖs serviced office industry as one of
the hardest hit in 2009.
NEW SERVICED OFFICE
ΓÇó-17% decrease in new serviced office
New SOTΓÇÖs fell by -17% in Q4 09 compared to Q4
08. This overall decrease in SOTΓÇÖs was the result of
substantial drops in take-up throughout November
(-31%) and December (-27%).
This decrease followed an increase of +21% in Q3 09,
the effects of which appear to have continued through to
October of Q4 which showed an +8% increase.
The -17% decrease positions Scotland as the only part
of the UK to experience a reduction in the number of
businesses entering serviced office space during Q4
09, with the average number of SOTΓÇÖs increasing +39%
throughout the rest of the UK during the same period. So
why is Scotland so far behind the rest of the UK?
With its inherently recession and budget friendly nature,
serviced office space is a traditional safe-haven for
business start-ups and entrepreneurial enterprises,
leading to the question; does the decline in SOTΓÇÖs
indicate a lack of entrepreneurial spirit in Scotland during
According to reports by The Princes Scottish Youth
Business Trust (PSYBT) this is not the case, having
recently announced a 39% increase in the number of
new business being funded during the final financial
quarter of 2009.
So if there is evidence of the entrepreneurial being alive
and well in Scotland, as the PSYBT would suggest, could
the answer lie in the types of businesses being created?
AVERAGE WORKSTATIONS PER SOT
ΓÇóAverage workstations per SOT
reached 4.2 ΓÇô rising +25% on Q4 08
The decrease in SOTΓÇÖs during Q4 09 coincided with a
revival in the number of workstations being taken per
new SOT, rising to 4.2 in Q4 09 compared to that of
3.3 in Q4 08, representing a +25% increase.
A rise in workstation requirements during Q4 09
heralded the first increase in this area during 2009,
with Q1-Q3 having registered an average decrease of
-36% on the figures recorded during 2008.
Analysis of Q4 09 shows that up-take in November
(+82%) was responsible for the increase, with
October (-7%) and December (-27%) both falling
short of their 2008 levels.
This November spike disrupts the consistent
pattern of decreased workstation sizes witnessed
from Q1 09 right through to November Q4 09.
As these types of SOTΓÇÖs have proved few and far
between during 2009, serviced office providers can
take some comfort knowing that SOTΓÇÖs wanting
space in greater volume have reappeared in the
SERVICED OFFICE SPACE COSTS
ΓÇóAverage price per workstation fell to
┬ú221.00 – Down 24% on Q4 08
During Q4 09 the average price per workstation fell
to ┬ú221.00, a reduction of ┬ú71.00 per workstation
from the Q4 08 cost of ┬ú292.00. This contributed to
the -16% decrease in workstation prices experienced
annually in Scotland during 2009.
A month by month comparison of Q4 09 reveals that
average workstation costs have continuously fallen
below Q4 08 levels. And while such a decline reflects
a nationwide trend rather than an exclusive trend in
Scotland, the levels recorded still show workstation
prices in Scotland to be ┬ú37.00 behind the national
average of ┬ú258.00 per workstation recorded for the
Despite a continued shortfall on Q4 08 prices, the
average cost per workstation did recover to within 2%
of 08 prices in December of Q4, suggesting that this
continued drop, while positive for buyers entering the
market, could be petering out.
INITIAL LICENSE LENGTHS
ΓÇóInitial license length commitment
rises to 7.9 months
New SOTΓÇÖs are signing initial licences averaging 7.9
months in Q4 09, equating to an increase of just
under half a calendar month compared to Q4 08.
In light of the free-falling workstation costs of Q4
09, it could be reasonable to assume that tenants
may have looked to take advantage, securing longer
terms at more favourable rates. And, as the only area
of the UK to experience an increase in the length of
licenses being signed during Q4 09, it would appear
that those businesses opting for serviced office space
have done so.
With other areas of the UK experiencing an average
drop of 2 months on initial license lengths, ScotlandΓÇÖs
growth in this area suggests that commitment levels
are higher amongst those businesses opting to enter
serviced office space during this period.
When taking into account all the information for Q4 09,
the following key findings can be drawn:
ΓÇóEnquiry levels continued to fall but recorded its
smallest deficit of 2009.
ΓÇóScotland recorded a fall in the number of SOTΓÇÖs –
the only UK region to do so during Q4 09.
ΓÇóWorkstation sizes increased, demonstrating a
return to larger requirements by Scottish firms.
ΓÇóWorkstation costs continued to fall and
showed Scotland to be ┬ú37.00 behind the
ΓÇóLicence lengths increased, making Scotland the
only area to record an increase during Q4 09.