Serviced Office Review: South East Q4 2009
Serviced Office Review: South East 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 East 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 East was compiled to provide a comparative
analysis of the changes within the serviced office
market during Q4 09.
ΓÇó16 new serviced offices
added to the officebroker.com
portfolio in Q4 09
ΓÇóEnquiry levels increased
ΓÇó+ 31% increase in new
serviced office tenants (SOTΓÇÖs)
ΓÇóAverage number of
workstations per SOT
climbed to 3.7
ΓÇóWorkstation costs dropped to
┬ú227.00 p/m ΓÇô down -18%
I nitial license agreements
decreased to 6.8 months
SUPPLY OF SERVICED OFFICE SPACE
ΓÇó16 new serviced offices added to
officebroker.com portfolio in Q4 09
The total number of serviced office buildings reached
348 in the South East region during Q4 09. This peak
figure followed the addition of 16 new offices to the
officebroker.com portfolio during Q4 09.
The 16 serviced office buildings added in Q4 09
were part of 66 buildings added during 2009. These
additions represented a +23% increase in the total
number of serviced office buildings available within
the South East.
As demonstrated by Fig.1, Q1-Q3 saw a steady
increase in the number of serviced office providers
entering the market in the South East. This was
followed by a levelling out of supply between
Q3-Q4 09 which saw 16 business centres added
countered by 16 business centres ceasing to trade.
The increase between Q1-Q3 suggests that
serviced office providers may have taken advantage
of the drops witnessed in prime rents to convert
conventional spaces into new business centres.
This increase in supply could also suggest that
expectations amongst serviced office providers are
positive for 2010.
DEMAND FOR SERVICED OFFICE SPACE
ΓÇóEnquiry levels increased by +7% in
The number of new enquiries received for serviced
office space increased by +7% in Q4 09, marking the
first financial quarter of 2009 to show an increase,
with Q1-Q3 09 having registered a decrease
averaging -16% compared to 08 levels.
As shown in fig.2, enquiry levels remained above
Q4 08 levels throughout October (+2%), November
(+12%) and December (+10%) of Q4 09.
Given the state of the UK economy in Q4 08 it is
perhaps understandable why enquiry levels continued
to drop. But with Q4 09 representing the financial
quarter which officially brought the UK economy out
of recession, it is perhaps reassuring that enquiry
levels have finally begun to increase once more
and could reflect a growing confidence in business
owners during this period or increased financial
assistance for SMEΓÇÖs.
The South East was only one of five UK regions to
experience growth in enquiry levels during Q4 09,
demonstrating a positive response from business
owners throughout the region.
NEW SERVICED OFFICE TENANTS (SOTS)
+31% increase in new serviced office
The number of new SOTΓÇÖs increased by +31% in Q4
09 compared to Q4 08. This rise occurred following
substantial increases in both October (+38%),
November (+21%) and December (+37%). (Fig. 4)
This latest quarterly increase in SOTΓÇÖs followed an
additional +7% rise in Q3 09, underpinning a recovery
in SOT levels, having dropped by an average of
-19.5% during Q1 and Q2.
Continued growth throughout Q4 09 shows that a
large numbers of new, individual businesses are now
entering the serviced office market. This, coupled with
the increase in enquiry levels, points toward South
East businesses having responded positively to the
effects of economic growth.
The lower levels of SOTΓÇÖs seen in 2008 could have
reflected how businesses were responding to the
threats of the recession, with business owners
becoming hesitant and less willing to commit due to
the uncertainty of the financial climate.
Continued growth however shows that any hesitancy
has now past, with SOTΓÇÖs on the increase in the south
East and a new influx of businesses taking advantage
of the inherently recession and budget friendly nature
of serviced office space.
AVERAGE WORKSTATIONS PER SOT
ΓÇóAverage workstations per SOT
The overall increase in new SOTΓÇÖs during Q4 09
corresponded with a nominal increase in the number
of workstations being taken.
At the close of Q4 09 the average number of
workstations per SOT was 3.7, an increase of +5%
on the 3.6 workstations being opted for during Q4 08.
A month-by-month analysis (Fig. 5) shows that
workstation requirements increased during both
October (+12%) and December (+9%) of Q4 09
while falling back slightly on 08 levels during
Smaller workstation requirements have become
a trend throughout Q4 09, reducing nationally by
-34%, but with both the number of SOTΓÇÖs increasing
and workstation requirements on the up, it would
suggest that businesses in the South East responded
positively to the economic recovery and were once
again expanding their operations.
SERVICED OFFICE SPACE COSTS
ΓÇóAverage price per workstation was
┬ú227.00 p/m – down -18% on Q4 08
During Q4 09 the average price per workstation
decreased to ┬ú227.00 from ┬ú279.00 p/m in Q4 08,
representing a -18% p/m decrease.
A month by month comparison (Fig. 6) of Q4 09
reveals that average workstation costs fell below those
of Q4 08 month-on-month.
By far the largest decrease was recorded in
October, falling -32% below Q4 08 levels, before
narrowing to -20% in November and moving to
within -1% in December.
Despite Q4 09 representing the fourth consecutive
quarter to record a fall in average workstation costs,
having decreased by an average of -24% between
Q1-Q3 09, the positive movement toward 08 levels
witnessed over the course of Q4 09 could point
toward signs of a recovery as the market enters 2010.
Compared to the national average workstation cost of
┬ú258.00 recorded for Q4 09, the South EastΓÇÖs average
cost of ┬ú227.00 per workstation places it ┬ú31.00 per
workstation behind national levels.
INITIAL LICENSE LENGTHS
ΓÇóInitial license length commitment
falls to 6.8 months
New SOTΓÇÖs are signing initial licences averaging 6.8
months in Q4 09, 2.1 months (-23%) shorter than in
the same period in 2008.
In light of the falling workstation costs experienced
during Q4 09, it could be reasonable to assume that
buyers may have looked to take advantage, securing
longer terms at more favourable rates. The decrease
of 2.1 months recorded in average licence lengths
however suggests that 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 Q4 09,
the following findings can be drawn:
ΓÇóEnquiry levels have continued to increase
throughout Q4 09.
ΓÇóThe overall number of new serviced office tenants
rose during the financial quarter ΓÇô suggesting
an increase in the number of new businesses
entering the serviced office market.
ΓÇóLarger workstation requirements have shown
signs of returning to the market, suggesting
that businesses are once more expanding their
ΓÇóAverage workstation costs continued to fall but
showed tentative signs of recovery toward the
close of Q4 09.
ΓÇóInitial license lengths fell as SOTΓÇÖs failed to
capitalise on the lower rates available from
serviced office providers