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Serviced Office Review – Greater London Q4 09

Serviced Office Review – Greater London Q4 09


Serviced Office Review: Greater London 09


The following report utilises statistics for Q4 09 from, 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 Greater London** region (not including
Central London):

ΓÇó 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

ΓÇó New Serviced Office Tenants:
– In terms of workstation prices and initial license
length commitment

Using the statistics from these areas, a detailed
overview of the serviced office industry in Greater
London was compiled to provide a comparative
analysis of the changes within the serviced office
market during Q4 09.


ΓÇó 20 new serviced offices
added to the
portfolio in Q4 2009

ΓÇó Q4 09 compared to Q4 08:
E nquiry levels increased by

ΓÇó + 60% increase in new
serviced office tenants (SOTΓÇÖs)

ΓÇó Average number of
workstations per SOT was 3.7

ΓÇó Workstation costs dropped to
£273.00 p/m from £343.00 p/m

ΓÇó Initial license agreements
decreased to 5.9 months ΓÇô
down 41%


ΓÇó 20 new serviced offices added to portfolio in Q4 09

The total number of serviced office buildings reached
344 in the Greater London area during Q4 09.

This peak figure followed the addition of 20 new
offices being added to the portfolio
during Q4 09.

The 20 serviced office buildings added in Q4 09
were part of 78 buildings added during 2009.

These additions represented a 23% increase in the
number of serviced office buildings available within
Greater London on

As demonstrated by Fig.1 Q1-Q3 saw a continuous
increase in the number of serviced office providers
entering the market in Greater London. Between Q3
ΓÇôQ4 however the number of providers declined as a
result of 41 business centres ceasing to operate.

The closure of so many business centres could be
the direct impact of the recession or the increased
competition entering the market between Q1-
Q3. But with a total increase of 78 serviced office
buildings being created in 2009, it would appear
that expectations for post-recession demand is high
despite the apparent difficulties experienced by some.


ΓÇó Enquiry levels increased by+4% in Q4 09


The number of new enquiries received for serviced
office space increased by +4% in Q4 09, marking the
first financial quarter of 2009 to record an increase in
enquiry levels after Q1-Q3 experienced an average
drop of 5%.

As shown in fig.2, enquiry levels remained below Q4
08 levels in October (-5%) before rising above them in
November (+16%) and December (+2%).

This resurgence in enquiry levels coincided with the
UK economy finally exiting its long-lasting recession.
As such it could be suggested that the increased
levels of enquiries received during Q4 09 occurred as
a result of increased confidence amongst business
owners heading into 2010.

If confidence levels had begun to rise during this
period, this may have driven business owners and
entrepreneurial endeavours into action, leading directly
to the boost in enquiries witnessed in 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 +4% shown in Greater London adds weight to expectations that Greater and Central London will be the heartlands for the economic recovery.


ΓÇó + 60% increase in new serviced
office tenants (SOTΓÇÖs).

The number of new SOTΓÇÖs increased by +60% in Q4
09 compared to Q4 08. This rise occurred following
substantial increases in both October (+49%),
November (+62%) and December (+69%). (Fig. 3)

This latest quarterly increase in SOTΓÇÖs follows similar
increases between Q1-Q3 09, which recorded an
average increase of +37% in the number of new SOTΓÇÖs
entering the serviced office market.

Continued growth in this area once again underpins
Greater LondonΓÇÖs credentials as a heartland for
recovery. The increase in both SOTΓÇÖs and enquiry
levels demonstrates the positive actions being taken
by businesses with the region.

The lower levels of SOTΓÇÖs seen in 2008 may also
reflect how businesses were responding to the impact
of the recession, with business owners becoming
hesitant and less willing to commit due to the
uncertainty of the financial climate.

Continued growth in this area however shows that any
hesitancy has now passed, with SOTΓÇÖs on the increase
in Central London and a new influx of businesses
taking advantage of the inherently recession and
budget friendly nature of serviced office space.


ΓÇó Average workstations per SOT
reached 3.7 ΓÇô down from 4.3 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 3.7, a decrease of -14%
on the 4.3 workstations being opted for during Q4 08.
A month-by-month analysis (Fig. 5) shows decreases
in October (-24%) and December (-28%) but a small
increase in November (+5%).

While the increase witnessed in November 09
was small, it represented an increase in what was
already a larger than average number of workstation
placements. The very presence of SOTΓÇÖs with larger
workstation requirements, which have proved few
and far between during 2009, shows a vibrancy
and ambition amongst businesses operating within
Greater London not present in many other regions of
the UK.

Despite the presence of larger requirements in
November 09, smaller workstation requirements,
typically 1-3 workstations, have become dominant
throughout 2009.

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 little sign of altering
within Greater London during the immediate future. As
such serviced office providers may increasingly come
under pressure to re-configure office templates in
order to match this demand.


ΓÇó Average price per workstation fell to
£273.00 p/m Down 20% on Q4 08

Another influencing factor on the rise in new SOTΓÇÖs
may be the competitive prices offered by serviced
office providers during this period.

During Q4 09 the average price per workstation fell
to £273.00 p/m from £343.00 p/m in Q4 08. A -20%
decrease during the financial quarter.

A month by month comparison (Fig. 5) of Q4 09
reveals that average workstation costs have fallen
below Q4 08 levels in both October (-25%) and
November (-31%)

A positive sign from this Q4 activity is the narrowing
of 08 and 09 workstation costs during December
Q4 (-2%). The movement back toward 08 levels,
differing by only £6.00 per workstation, is a substantial
step forward from the average deficit of £102.00 per
workstation recorded during October and November
of the same financial period.

Compared to the national average workstation
cost of £258.00 p/m recorded for Q4 09, Greater
London’s average cost of £273.00 per workstation
places it £15.00 per workstation above these
nationwide levels. While it is positive that Greater
London has remained above this figure in Q4 09, in
Q4 08 the average cost per workstation in Greater
London was £56.00 per workstation above the
national average ΓÇô demonstrating the severity of the
downturn experienced by the serviced office industry
during 2009.


ΓÇó Initial license length commitment
falls to 5.9 months – 41% down in
Q4 09

New SOTΓÇÖs were signing initial licences averaging 5.9
months in Q4 09, 4.0 months (41%) shorter than in the
same period in 2008.

In light of the falling workstation costs experienced
during the majority of Q4 09, it would be reasonable
to assume that buyers may have looked to take
advantage, securing longer terms at more favourable
rates. The 4.0 month decrease (41%) 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
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
Greater London Q4 09, the following findings can
be drawn:

ΓÇó Enquiry levels have grown for the first time in

ΓÇó The overall number of new serviced office
tenants rose during the financial quarter ΓÇô
suggesting an influx of new businesses into the
serviced office industry.

ΓÇó Larger workstation requirements have remained
mostly absent from the market, suggesting that
smaller requirements will continue to dominate/

ΓÇó Average workstation costs continued to fall but
moved toward the higher 2008 levels by the close
of Q4 09.

ΓÇó Initial license lengths fell as SOTΓÇÖs failed to
capitalise on the lower rates available from
serviced office providers.

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Author: | February 15, 2010 | 0 Comments

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