Serviced Office Review: Wales Q4 09
Serviced Office Review: Wales 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 results on the following key areas
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 Wales was
compiled to provide a comparative analysis of the
changes within the serviced office market during Q4 09.
ΓÇó7 new serviced offices added
to the officebroker.com
portfolio during the entirety of
2009 – Representing a +17%
Q4 09 compared to Q4 08:
ΓÇóEnquiry levels fell – 30%
ΓÇó+ 89% rise in new serviced
office tenants (SOTΓÇÖs)
ΓÇóWorkstations per SOT
decreased – 53% to 3.5
ΓÇóAverage workstation price
increased to ┬ú532.00 from
ΓÇóInitial license agreements
decreased to 4.8 months –
SUPPLY OF SERVICED OFFICE SPACE
ΓÇó7 serviced office buildings were
added to the officebroker.com
portfolio during 2009, representing
a +17% increase in the number of
serviced office buildings available.
The total number of serviced office buildings reached
41 in Wales during Q4 09. This peak figure followed
the addition of 7 new offices to the officebroker.com
portfolio between Q1 ΓÇô Q4 09.
As shown in Fig. 1 the increases in new serviced
office buildings took place between Q1-Q3 09 before
levelling off and remaining static between Q3-Q4 09.
Unlike many other UK regions, prime rents on
commercial property have remained stable** in Wales
throughout 2009, including key business areas such
as Central Cardiff.
The static nature of these prime rents, estimated
to be ┬ú21 psf, may have limited the number of new
serviced office building being established in Wales
during this period. As in other areas of the UK, where
prime rent levels fell substantially, there had been a
large influx of new serviced office building most likely
fuelled by the opportunity to secure new spaces for
conversion to business centres at these lower rates.
It is feasible that those serviced office providers who
have invested in the creation of new business centres
have timed their acquisitions well, as with the UKΓÇÖs
recently confirmed exit from recession it may well lead
to a slow, but sure recovery in demand levels and
subsequent rise in prime rents.
DEMAND FOR SERVICED OFFICE SPACE
ΓÇóEnquiry levels dropped by -30% in Q4
09 following increases earlier in 2009
The number of new enquiries received for serviced
office space in Wales dropped by -30% in Q4 09
resulting in the total number of enquiries for 2009
ending -4% below those of 2008.
As shown in Fig. 2 enquiry levels for serviced office
space in Wales had remained buoyant throughout
Q1-Q3 09, registering an increase in Q2 (+1%) and Q3
(+13%) before falling by -30% in Q4.
The -30% decline in enquiry levels was the largest
decrease of its kind seen in any region of the UK
during Q4 09.
NEW SERVICED OFFICE
ΓÇó89% increase in new serviced office
The number of new SOTΓÇÖs rose by +89% in Q4 09
compared to Q4 08. This occurred following a +150%
rise in October and a substantial +50% increase in
November. Results for December finished level with
those of Q4 08.
The exceptional growth seen in Q4 followed another
large increase in Q3 (+109%), both of which
compensated for Q1 and Q2 which saw an average
decline of -45% in the number of new SOTΓÇÖs.
Although the number of SOTΓÇÖs rose nationally
during Q4 09, the increases that occurred in Wales
outperformed all other UK regions, placing above
the North East (+69%) and West Midlands (+63) as
the areas most successful in attracting new SOTΓÇÖs
throughout Q4 09.
Growing exposure to the serviced office market
will also have fuelled education levels, creating the
opportunity for serviced office providers to capitalise
and potentially increase overall market share if client
experiences prove to be positive.
AVERAGE WORKSTATIONS PER SOT
ΓÇóAverage workstations per SOT
reached 3.5 ΓÇô falling 53% on Q4 08
The overall increase in new SOTΓÇÖs during Q4 09
corresponded with a substantial drop in the number of
workstations being opted for.
Closer analysis of Q4 shows the biggest deficit to have
occurred in October, falling -82% below Q4 08 levels.
Workstation levels did however increase during November
(+88%), before levelling out in December.
It is clear that the -53% decrease in workstation size
requirements was a direct result of the larger deals seen in
October Q4 08 failing to materialise in Q4 09.
The disappearance of SOTΓÇÖs with larger workstation
requirements could be the direct result of the economic
downturn, demonstrating the streamlining and refocusing
taking place within businesses in order to conserve and
protect their core needs.
Alternatively, the smaller workstation requirements,
coupled with the overall increase in SOTΓÇÖs, could suggest
that the serviced office market has experienced an influx
of new-start businesses. Such new-start businesses, who
naturally have smaller requirements, would probably find
the recession and budget friendly nature of serviced office
space appealing ΓÇô driving this change in demand.
Smaller workstation requirements have become a trend
throughout 2009, reducing in Wales and nationally by an
average of -14% between Q1-Q3 09.
In order to match this change in demand, serviced office
providers may have felt it necessary to re-configuring
office floors in order to secure new SOTΓÇÖs.
SERVICED OFFICE SPACE COSTS
ΓÇóAverage price per workstation ended
at ┬ú532.00 – Up 33% on Q4 08
The average price per workstation rose to ┬ú532.00 in Q4
09 from ┬ú402.00 in Q4 08. On closer inspection however
it becomes clear that this rise was the result of a series
of high value deals during October of Q4 09. Despite
these deals leading to an overall increase, the spike seen
in October does appear to run against the wider trend of
falling workstation costs seen during the majority of Q4
It may also be sensible to assume that the overall drop in
workstation costs could be linked directly to the overall
rise in SOTΓÇÖs. With both an increase in the number of
serviced office providers and a decline in workstation
costs, businesses looking to secure office space will have
been faced with a wider than ever choice and falling costs
ΓÇô drawing new clients to serviced offices.
While such a decline reflects a nationwide trend rather
than an exclusive trend in Wales, it would appear that
despite a decline in workstation costs, Wales has
achieved levels far in excess of national averages. This
is best reflected in the +┬ú222.00 difference between the
national average workstation cost of ┬ú252.00 and the
average workstation cost of ┬ú474.00 recorded for Wales
during the entirety of 2009.
INITIAL LICENSE LENGTHS
ΓÇóInitial license length commitment falls
to 4.8 months – 54% down in Q4 09
New SOTΓÇÖs are signing initial licences averaging 4.8
months in Q4 09, 5.7 months (-54%) shorter than in
the same period in 2008.
In light of the free-falling workstation costs of Q4 09,
it could be reasonable to assume that buyers may
have looked to take advantage, securing longer terms
at more favourable rates. The 5.7 month decrease
(+54%) 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:
ΓÇóEnquiry levels fell by their largest margin of 2009
in Q4 09
ΓÇóA continued influx of new SOTΓÇÖs placed Wales
as the region witnessing the biggest increase in
SOTΓÇÖs during Q4 09
ΓÇóWorkstation requirements continued to fall,
suggesting a change in the shape and size of
businesses entering the market
ΓÇóA series of high value deals in October Q4 drove
the average cost per workstation up – suggesting
an uptake of ΓÇÿGrade AΓÇÖ space
ΓÇóLicence lengths continued to fall as businesses
failed to capitalise on an overall weakening of