Serviced Office Review: South West Q4 2009
Serviced Office Review: South West 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 South West 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 South
West was compiled to provide a comparative analysis
of the changes within the serviced office market
during Q4 09.
ΓÇó12 new serviced offices
added to the officebroker.com
portfolio in Q4 09
ΓÇóEnquiry levels increased
ΓÇó+ 33% increase in new
serviced office tenants (SOTΓÇÖs)
ΓÇóAverage number of
workstations per SOT was 3.8
ΓÇóWorkstation costs dropped to
ΓÇóInitial license agreements
decreased to 6.5 months
SUPPLY OF SERVICED OFFICE SPACE
ΓÇó7 new serviced offices added to
officebroker.com portfolio in Q4 09
The total number of serviced office buildings reached
147 in the South West region during Q4 09. This peak
figure followed the addition of 7 new offices to the
officebroker.com portfolio during Q4 09.
The 12 serviced office buildings added in Q4 09
were part of 35 buildings added during 2009.
These additions represented a +31% increase in the
total number of serviced office buildings available
within the South West region.
As demonstrated by Fig.1, increases in the number of
serviced office buildings occurred quarter-on-quarter
in 09, with the sharpest rise taking place between Q2
An increase in the number of new serviced office
buildings coincided with prime rent levels in
commercial centres such as Bristol reaching, as
reported by DTZ**, what is expected to be their
lowest level before beginning to rise once more.
This suggests that serviced office providers remain
optimistic about the appeal of serviced offices, having
taken advantage of the lower prime rents to secure
additional commercial property for conversion to
business centres. Such investment points toward
providers long-term commitment levels and how
serviced offices have become increasingly appealing
to SMEΓÇÖs and business start-ups.
DEMAND FOR SERVICED OFFICE SPACE
ΓÇóEnquiry levels increased by +4% in
The number of new enquiries received for serviced
office space increased by +4% in Q4 09, marking the
first financial quarter of 2009 to show an increase in
this area, with Q1-Q3 09 having registered an average
decrease of -11% compared on 08 levels.
As shown in fig.2, enquiry levels exceeded Q4 08
levels in both October (+13%) and December (+9) but
fell behind during November (-7%).
These results make the South West only one of
five UK regions to experience enquiry level growth
during Q4 09.
Such activity demonstrates a positive response from
South West businesses during the financial quarter,
the same quarter which finally saw the UK economy
emerge from recession.
This rise in enquiry levels will provide reassurance to
those serviced office providers who introduced new
business centres during 2009. As identified in the
previous section of this report (Fig.1), if providers plans
for a sustained increase in serviced office demand
are to prove well founded, enquiry levels will need to
continue to rise in order to generate the necessary
occupants to make these investments viable.
NEW SERVICED OFFICE TENANTS (SOTS)
ΓÇó+33% increase in new serviced office
The number of new SOTΓÇÖs increased by +33% in
Q4 09. This increase followed rises of +20% in
October, +53% in November and +20% in December
above the levels recorded during the same period of
2008. (Fig. 3)
This increase on 08 levels marked the second
consecutive financial quarter to experience growth
in SOTΓÇÖs, with Q3 09 having recorded a substantial
+73% increase on Q3 09 levels. Such increases are
in stark contrast to the average -15% deficit recorded
between Q1-Q2 09.
The continued growth in SOT levels during the final
two quarters of 09, shows that a large number of
new individual businesses have begun entering
the serviced office market. Coupled with the rise in
enquiry levels during Q4 09, this activity demonstrates
that the positive intentions shown by businesses are
being pushed through to completion.
While the lower levels of SOTΓÇÖs seen in 2008 could
have reflected how businesses were responding to
the impact of economic recession, with business
owners becoming hesitant and less willing to commit
due to the uncertainty of the financial climate, the
continued growth in this area during Q4 09 shows
that any hesitancy has now pasted, with SOTΓÇÖs
on the increase in the South West and a new influx
of businesses taking advantage of the inherently
recession and budget friendly nature of serviced
AVERAGE WORKSTATIONS PER SOT
ΓÇóAverage workstations per SOT
reached 2.8 ΓÇô down -14% on Q4 08
The overall increase in new SOTΓÇÖs during Q4 09
corresponded with a decrease in the number of
workstations being taken per SOT throughout the
At the close of Q4 09 the average number of
workstations per SOT was 2.8, a shortfall of -14% on the
3.3 workstations being taken per SOT during Q4 08.
A month-by-month analysis (Fig. 4) shows that
workstation requirements initially increased during
October, rising +20% above October 08 levels, before
falling below 08 levels in the following months of
November (-34%) and December (-25%).
Smaller workstation requirements have become a
trend throughout Q4 09, reducing nationally by -34%,
most likely driven by a rise in smaller start-upΓÇÖs entering
the market and the downsizing taking place by those
weathering the financial difficulties of 2009.
Despite the decline in overall workstation requirements
during Q4 09, the increase seen in October 09 provides
some positive indications that larger requirements are
reappearing in the market. Given the increases witnessed
in enquiry and SOT levels, it would once again suggest
that the foundations are laid for a possible upswing in
early to mid 2010.
SERVICED OFFICE SPACE COSTS
ΓÇóAverage price per workstation was
┬ú259.00 p/m – up +11% on Q4 08
During Q4 09 the average price per workstation increased
to ┬ú259.00 p/m from ┬ú233.00 p/m in Q4 08, representing
a +11% increase during the financial quarter.
A month by month comparison (Fig. 5) of Q4 09, reveals
that average workstation costs exceeded Q4 08 levels
in two out of three months, with November recording a
+28% increase and December showing a more modest
Average workstation costs in the South West region have,
despite dropping national by an average of -13% during
the same period, risen by +8% between Q2-Q4 09,
demonstrating the strength of the serviced office industry
in the South West and the lesser extent to which the
economic downturn appears to have impacted upon it.
Compared to the national average workstation cost
of ┬ú258.00 p/m recorded for Q4 09, the South WestΓÇÖs
average cost of ┬ú259.00 per workstation places it ┬ú1.00
per workstation above these nationwide levels.
INITIAL LICENSE LENGTHS
ΓÇóInitial license length commitment falls
to 6.5 months
New SOTΓÇÖs are signing initial licences averaging 6.5
months in Q4 09, 2.4 months (-27%) shorter than in
the same period in 2008.
One possible explanation could be a reluctance
by business owners to over-commit, particularly
with the harsh lessons of a recession still fresh,
instead focusing on short and mid-term requirements
that provide a greater deal of flexibility to their
A secondary explanation could be the direct influence
of office providers. If a recovery is to take place in
2010 and the strong response in the South West
continues to grow, then allowing occupants to secure
terms beyond Q2 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 findings can be drawn:
ΓÇóEnquiry levels have finally moved from negative to
ΓÇóThe overall number of new serviced office tenants
rose during the financial quarter ΓÇô suggesting an
increase in new businesses entering the serviced
ΓÇóSmaller workstation requirements remain
dominant but signs of larger requirements
have returned to the market, suggesting that
businesses are once more expanding their
ΓÇóAverage workstation costs continued to rise for a
third consecutive quarter.
ΓÇóInitial license lengths fell as SOTΓÇÖs failed to
capitalise on the lower rates available from
serviced office providers.