Serviced Office Review: Wales – Q1 2010
How has the Serviced Office Market in wales coped during the opening months of 2010?
Quarterly Research ΓÇô Serviced Office Industry
ΓÇó1 new serviced office building added to the officebroker.com portfolio
ΓÇóEnquiry levels increased by +15%
ΓÇóNew serviced office tenants (SOTΓÇÖs) decreased by -225%
ΓÇóWorkstations per SOT rose from 3.1 ΓÇô 3.3
ΓÇóAverage workstation price dropped from ┬ú417.00 from ┬ú287.00
ΓÇóInitial license agreements increased to 10 months
The following report utilises statistics for Q1 10 from officebroker.com, the UKΓÇÖs leading independent broker of serviced office space, to present findings on activity within the serviced office industry.
The report presents results on the following key areas in Wales:
Supply of and demand for serviced office space
ΓÇóIn terms of the number of enquiries, the size and shape of those enquiries and the number of placements
New Serviced Office Tenants:
ΓÇóIn terms of workstation prices and initial license length commitment
Using the statistics from these areas, a detailed overview of the serviced office industry in Wales was compiled to provide a comparative analysis of the changes within the serviced office market during Q1 10 compared to Q1 09.
*officebroker.com statistics account for activity within the following postcode prefixes:
CF, LL, NP and SA
Supply of Serviced Office Space ΓÇô Wales Q1 2010
ΓÇó1 new serviced office building added to the officebroker.com portfolio in Q1 10
The total number of serviced office building in Wales rose to 42 by the close of Q1 10. This increase was the result of 1 new building offering serviced offices being added to the officebroker.com portfolio.
As can be seen in Fig 1, the number of serviced office buildings had risen steadily during the early part of 09 before levelling out in the final two quarters of the year.
The increase of 1 new building during Q1 10 suggests that serviced office providers are still identifying suitable locations and that the financial environment for such expansions still exits in the commercial property market in Wales.
Unlike other areas of the UK, the supply of serviced office buildings in Wales has remained relatively stable, with new buildings entering the market steadily in 2009 and only 1 building being removed as a result of it ceasing to trade.
Demand for Serviced Office Space
ΓÇóEnquiry levels increased by +15 in Q1 10 compared to Q1 09
The number of new enquiries received for serviced office space in Wales increased by +15% in Q1 10 when compared to Q1 09 figures. This increase is the largest of its kind since 2008.
As shown in Fig 2, serviced office enquiries increased month-on-month in both February (+48%) and March (+38%) despite initially recording a deficit in January (-25%).
In the case of the -25% deficit recorded in January, it was the largest decrease of it kind in any UK region during the opening month of 2010. Having recorded this decline Wales became 1 of only 4 UK regions to record negative growth in enquiries during January.
Despite the recovery in February and March, which would certainly have been boosted by the expansion of officebroker.comΓÇÖs marketing and affiliate activity*, the overall gain of +15% during Q1 10 was the smallest percentage increase recorded in any UK region.
When considering the enquiry level activity during the opening quarter of 2010, it is advisable to consider the detrimental affects of the prolonged and, in many areas of South Wales, severe winter weather that occurred from December 09 through to February 10. While the impact of this weather certainly affected the ability of existing businesses to function to full capacity, it would also be reasonable be assumed that the same disruptive effects could have delayed and deterred workspace enquiries ever reaching their full potential during Q1 10.
*Effective from 1st February 2010, officebroker.com extensively expanded its online marketing activity and affiliate program.
As a direct result of this activity the number of enquiries received by officebroker.com increased substantially during February and March. Such increases, while generating abnormally large changes when placed against previous data, will ensure that the statistics reported by officebroker.com are an even more accurate assessment of the serviced office market here in the UK.
New Serviced Office Tenants (SOTΓÇÖs)
ΓÇóNew serviced office tenants (SOTΓÇÖs) fell by – 225%
The number of new SOTΓÇÖs decreased by -225% in Q1 10 compared to Q1 09, marking the first such decrease in over 12 months having risen quarter-on-quarter during the course of 2009.
As demonstrated by Fig 3, the declines on Q1 09 levels month-on-month were severe and consistent throughout Q1 10, falling by -50% in January before decreasing yet further in February (-60%) and March (-83%).
Historically the total number of new SOTs entering the marketplace in South Wales during Q1 accounts for 18% of the total SOTs entering the market annually. If this pattern were to establish itself in the same way during 2010 this would suggest that the overall number of SOTs would dramatically decrease in Wales during 2010.
Given the strong growth (+37%) recorded during 2009 however it is highly unlikely that these severe decreases will continue. The most likely explanation would again lie with the disruptive and deterring effects of the prolonged winter weather. It would therefore be reasonable to assume that additional and perhaps rapid growth in SOTs will begin to occur during or after Q2 10 as businesses re-schedule their activity.
Average Workstations Per SOT
ΓÇóAverage workstations per SOT reached 3.3 ΓÇô increasing +6% on Q1 09 levels
Despite the low number of SOTs entering the market during Q1 10, the average number of workstation placed per SOT increased by +6%, rising from 3.1 workstations in Q1 09 to 3.3 workstations by the close of Q1 10.
As shown in Fig 4, this overall increase occurred as a result of the +50% rise recorded in January, offsetting the smaller decreases that followed in both February (-4%) and March (-7%). This rise represents the first sustained increase in workstation take-up since 2008.
While serviced office providers will no doubt have been hoping to see greater workstation demand during the opening quarter of 2010, given the severe decline in SOTs and troublesome weather the fact that an increase was recorded at all should be seen as positive.
As highlighted in the Q4 09 Serviced Office Review Series, smaller workstation requirements dominated the UK serviced office market during 2009, having fallen by -26% nationally and by -30% in Wales. These reduced requirements were a by-product of the economic turmoil. Driven by caution, streamlining and financial restrictions, businesses naturally gravitated toward these smaller requirements in order to maintain flexibility and control expenditure ΓÇô a trend which is likely to continue to dominate in 2010.
The average workstation take-up of 3.3 during Q1 10 in Wales was 1 workstation below the national average of 4.3 for the same period.
Serviced Office Space Costs
ΓÇóAverage price per workstation increased to ┬ú226.00 in Q1 10
The average price per workstation increased from ┬ú183.00 in Q1 09 to ┬ú226.00 in Q1 10, representing an overall increase of +23%.
Initial License Lengths
ΓÇóInitial license length commitment rose to 10 months – 41% up on Q1 09.
New SOTs were signing initial licences averaging 10 months during Q1 10, 2.9 months longer (+41%) than in the same period of 2009.
It would appear that despite the decline in SOTs, those that did complete a move to new serviced offices during Q1 10 were showing increased levels of commitment. This marked change, which is the first sustained increase of its kind in the Welsh market since 2008, may suggest that business confidence is now resulting in individual businesses focusing on the mid-to-long term, rather than the immediate short-term as had become common place during 2009.
If the decline in SOTs was indeed the result of severe weather, this increased commitment, along with the rise in workstation requirements, could provide a positive forecast for the prosperity of the serviced office market in Wales once those SOTs derailed by the harsh winter weather return to the market.
When taking into account all the information for Q1 10, the following findings can be drawn:
ΓÇóEnquiry levels increased but at a slower rate than all other UK regions
ΓÇóThe number of new individual SOTs decreased for the first time since 2008 ΓÇô most likely the impact of the severe weather affecting the region for much of the quarter
ΓÇóWorkstation requirements rose marginally and for the first time since 2008
ΓÇóThe average price per workstation decreased substantially and continued the unstable pattern of peaks and troughs recorded throughout 2009
ΓÇóInitial license lengths also increased for the first time since 2008, indicating that those businesses that were able to complete a move to serviced office space in Q1 were more confident and willing to commit.