The Serviced Office Market
You may have seen our recent investment opportunity, Regent 88, a serviced-office situated in one of East London’s fastest growing neighbourhoods, the City of Stratford. Where, according to JLL (2016), house prices are set to grow 30% between 2016 and 2020; with new builds in the area increasing by over 6% in the 12 months leading up to Q3 2015 (compared to the 1.5% for the whole of Central London).
So, what exactly is a serviced office?
Let’s start with Regent 88, our own serviced office investment opportunity. In layman’s terms, a serviced office is an; office building that is fully equipped and managed by a facility management company, which then rents individual offices or floors to other companies. For lots of businesses, these offices provide everything you need in terms of facilities, with often an added bonus of having a full maintenance team on site. Serviced offices cater for various people, from entrepreneurs looking for co-working spaces to SME’s seeking flexibility and the room to expand.
The serviced office market in the UK is extremely strong, it’s seen a 31 percent increase in growth since 2008. By 2025 experts are forecasting the market to reach £62bn, with more optimistic forecasts seeing the space worth as much as £126bn. There are three key drivers behind its rise: increasing numbers of growth businesses, expansion of key sectors that use serviced offices and the trends towards more flexible working (CoStar, 2016).
What’s even more impressive about the UK serviced office market, is its performance in comparison to the rest of Europe and the US. The UK has the largest and most mature serviced office market, currently accounting for 36% of the international market (CoStar, 2016).
Giles Fuchs, Co-founder and CEO of Office Space in Town, is proud to be at the centre of the world’s serviced office market and expects to see further growth in the future:
“With more and more businesses seeking flexible and dynamic office space, the exponential growth of the serviced office sector is unsurprising as is the fact that the valuation of serviced offices is an issue currently being hotly debated. With the UK as the world leader within the sector, we are proud that London is the centre of this important industry dialogue and the framework that we have proposed within this report is the result of collaboration between experienced industry experts. With strong growth expected in the next decade and continued interest from institutional investors, the accurate valuation of serviced offices will become ever more significant and important” (Insight, 2016).
Deloitte Real Estate also explored the demand and popularity of the serviced office market, focusing on London in their Business Footprint Report. The report found that the serviced office market has grown by 67% over the last 10 years, with Chris Lewis, Head of Tenant Representation, adding, “This significant increase in coverage highlights how important serviced offices have become, not just to occupiers but the wider office market” (Delloite., 2016)
PWC recently ranked serviced offices 5th in their Emerging Trends in Real Estate Europe 2016 survey (PWC, 2016) citing fast-growing tech-based businesses as one of the main factors behind the growth of the serviced office space. They also stated ‘urbanisation was driving the speed of the change which has seen serviced offices become the first choice for many businesses.
As a business, ShareProperty understands that renting a premise is a huge expense, they generally come with fixed term contracts of 3-5 years. With many businesses operating on a month-by-month basis, especially start-ups and early stage growth businesses, renting doesn’t allow a business to opt-out early – not without paying a price. In addition to the long, expensive rental agreements, you often have to purchase all the necessary communications systems; furnish and decorate the interior, and establish your brand in the area.
The potentially crippling terms of standard office rental agreements, are becoming a mismatch for the flexible fully-functioning serviced office, and the examples of successfully serviced offices grow each day. A great example is that of Sophia House in Cardiff, a set of serviced offices which has been operating for almost 20 years. Sophia House is a prime example of how serviced offices take advantage of unique spaces; sitting within the walls of an Edwardian building on the prestigious Cathedral Road.
Our own investment opportunity Regent 88, hopes to replicate the longstanding success of Sophia House, in its home of the City of Stratford. For further information regarding Regent 88, why not read Regent 88.
Capital at Risk
If you are interested in finding out more about Regent 88 get in touch with Matthew (firstname.lastname@example.org). Please note, we also have several other investment opportunities including Daniel House, a newly refurbished residential apartment block, situated within a thriving area of Liverpool. View Daniel House – Capital at Risk
Shareproperty Limited (FRN: 740242) is an appointed representative of Kession Capital Limited (FRN: 582160) which is authorised and regulated by the Financial Conduct Authority in the UK.
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