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Serviced Office Review: North West Q4 2009

Serviced Office Review: North West Q4 2009

Serviced Office Review: North West Q4 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 North 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
length commitment

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


ΓÇó35 new serviced offices
added to the
portfolio in Q4 09

ΓÇó133 new serviced offices
added to the
portfolio during the entirety
of 2009

Q4 09 compared to Q4 08:

ΓÇóEnquiry levels rose 12%

ΓÇó24% rise in new serviced
office tenants (SOTΓÇÖs)

ΓÇóAverage workstation price
dropped to £188.00 p/m from
£279.00 p/m

ΓÇóInitial license agreements
decreased to 6 months –
down 21%


ΓÇó35 new serviced offices added to portfolio in Q4 09.

ΓÇó133 serviced office buildings were
added to the
portfolio during 2009, representing
a 38% increase in the number of
serviced office buildings available.

The total number of serviced office buildings reached
350 in the North West region during Q4 09. This peak
figure followed an addition of 35 new offices to the portfolio during Q4 09.

Those 35 serviced office buildings added in Q4 09
were part of 133 buildings added during the entirety
of 2009. These additions represented a 38% increase
in the number of serviced office buildings available
within the North West region.

As demonstrated by Fig.1 the influx of new serviced
offices was continuous, with the sharpest increase
occurring between Q2 and Q3.

The increase in serviced office space supply
throughout the North West could be linked to the
rise of cities like Manchester and Liverpool as
international business centres. The growth of which
has been aided by investment in transportation and
infrastructure, the extensive motorway network,
international airports and the 50,000 + graduates
produced each year by a selection of high achieving
universities in the region**.

With these resources and an educated workforce
already present it is perhaps no surprise that serviced
office providers have increased their presence in the
region, positioning themselves to benefit from the
regions growing presence on the European stage.


ΓÇóEnquiry levels increased by +12%
in Q4 09


The number of new enquiries received for serviced
office space rose +12% in Q4 09 and proved to be
a continuation of the growth seen in the previous
financial quarters of 2009.

In Q4 09 enquiry levels exceeded those of Q4 08
month on month (Fig.2) with November (+29%)
revealing the largest increase while October (+3%) and
December (+4%) registered more nominal increases.

The positive pattern seen in Q4 09 could reflect the
growing confidence levels seen in business owners
during this period along with increased financial
assistance for SMEΓÇÖs.

When comparing results for the North West against
national averages for the same period, the North West
was only 1 of 5 UK Regions to experience an increase
in enquiry levels. Of these 5 regions the North West
recorded the second highest rise behind the West
Midlands which experienced an increase of +21%.


ΓÇóNumber of workstations, as
requested during initial enquiry
process, grew 10% above Q4 08

Another market indicator experiencing a slight
increase in Q4 09 was workstation size requirements,
representing the number of workstations requested by
clients during the initial enquiry process.

While October and November remained relatively
consistent, fluctuating between 2ΓÇô 10% below Q4 08
levels, December recorded an increase of 43% leading
to the overall rise of +10% for the financial quarter.

This 10% rise represented the first positive result in
this area of the market for 2009, with all previous
quarters recording an average deficit of -15% below
Q4 08 levels and perhaps indicating an increasing level
of confidence amongst business owners.


ΓÇó+24% increase in new serviced office
tenants (SOTΓÇÖs)

The number of new SOTΓÇÖs rose by +24% in Q4 09 compared
to Q4 08. This rise occurred following a +10% increase in
October and a substantial 104% increase in November.
Results for December did however finish 27% below their Q4
08 levels, demonstrating a drop in the number of businesses
seeking to establish premises in the run-up to 2010.

Growth in Q4 09 followed similar rises between Q2-Q3 09,
highlighting an influx of new clients to the serviced office

Despite the continued growth in SOTΓÇÖs during Q4 09, the
+24% increase on Q4 08 figures seen in the North West fell
15% short of the 39% national average recorded during this
same period.

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 remain positive.


ΓÇóAverage workstations per SOT
reached 5.3 ΓÇô rising 38% on Q4 08

The overall increase in new SOTΓÇÖs during Q4 09
corresponded with an accompanying rise in the number
of workstations per SOT.

At the close of Q4 09 the average number of
workstations per SOT was 5.3, an increase of +38%
above the 3.9 workstations being opted for during
Q4 08.

This increase places the North West amongst only 5 UK
regions to experience a rise in the number of average
workstations per SOT during this period.

Smaller workstation requirements have been a growing
trend throughout 2009, reducing in the North West by
an average of -26% between Q1-Q3 09 and nationally
by -26%. In order to match this demand serviced office
providers may have felt it necessary to reconfigure office
floors in order to secure new SOTΓÇÖs.

This December spike disrupts this pattern however,
and 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 marketplace.


ΓÇóAverage price per workstation fell to
┬ú188.00 p/m – Down 33% on Q4 08

Another influencing factor on the rise in new SOTΓÇÖs
may have been the competitive prices being offered by
serviced office providers.

During Q4 09 the average price per workstation fell
to £188.00 p/m from £279.00 p/m in Q4 08. This
contributed to the -26% decrease in workstation prices
experienced annually in the North West during 2009.

A month by month comparison of Q4 09 reveals that
average workstation costs have continuously fallen below
Q4 08 levels, excluding October which remained static.

While such a decline reflects a nationwide trend rather than
an exclusive trend in the North West, it would appear that
the levels of decline have been felt more heavily within the
North West. This heavier impact is reflected in the £70.00
difference between the national average workstation cost
of £258.00 p/m and the average workstation cost of
£188.00 p/m recorded for the North West.

This continued drop, while positive for buyers entering
the market, could mean a long period of recovery will be
needed for the serviced office providers.


ΓÇóInitial license length commitment falls
to 6 months – 21% down in Q4 09

New SOTΓÇÖs are signing initial licences averaging 6 months
in Q4 09, 1.5 months (-21%) shorter than in the same
period in 2008.

In light of the free-falling workstation costs of Q4 09, it
would be reasonable to assume that prospective tenants
may have looked to take advantage, securing longer
terms at more favourable rates. The 1.5 month decrease
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 findings can be drawn:

ΓÇóEnquiry levels have exceeded 2008 levels.

ΓÇóThe overall number of new serviced office
tenants rose during the financial quarter –
highlighting an influx of new businesses into
the serviced office industry.

ΓÇóQ4 saw a return of SOTΓÇÖs requiring larger numbers
of workstations to the market.

ΓÇóAverage workstation costs continued to fall
placing the North West far below the national

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

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Author: | February 16, 2010 | 0 Comments

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