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New data from 2015 shows that serviced offices currently take up over 5 million sq. ft. of space across central London. As serviced office providers offer solutions to the numerous problems that tenants experience on the commercial property market, a market which is based on regulations created by landlords, these short term options for tenants are constantly increasing in popularity.
One issue that tenants face is the limited available office spaces. This lack of available stock across London has caused most landlords to demand around five years of commitment on a new lease for security. The lack of flexibility is unrealistic for most small and new business such as start-up firms or companies which are anticipating high growth. In stark contrast, serviced offices will agree licenses to occupy at only three month terms.
Another potential barrier with leasehold properties are the deposits that the landlords require, which can be of significant sums. Consequently, companies that are unable to pass the market standard profit test face a charge of between 6 – 12 months deposit. For many new companies, these fees are unaffordable, and considered to be better spent on investing the capital into the business instead. Serviced offices differ on this account as well, as tenants will rarely be asked to pay over three months deposit.
Eugene O’Sullivan, Managing Director at Morgan Pryce, said: “It’s not only the tough lease terms that are pushing more tenants towards serviced offices. It also boils down to the fact that serviced office providers are changing the industry, by offering unique and desirable offices for companies looking for a flexible place, which has a bit more to it.”
The serviced office market providers, such as Wework, are changing the industry by opening bright, creative and unconventional spaces all over London. Additionally, companies such as Workspace now focus on the creative companies who desire the perks of serviced offices, and have started ‘Boutique Workspace’ to cater to this sector.
This news was brought to you by Morgan Pryce, a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.