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The serviced office was born 30 years ago and traditionally occupied fringy locations in cities were the buildings tended to be of a lower quality than we see today. In the last 4 years the serviced office market has experienced a boom and has been healthier than the traditional leased office market.
Over the last year or two, in many respects the serviced office market has been the saviour of London due to the severe shortage of office space available. During the recession, construction in central London ground to a halt and things only started to get going again in 2013, but this created a delay on the new stock coming through. The lack of new developments coupled with Westminster making it easy to obtain planning permission for office to residential conversion exacerbated the situation further, leading to a dangerous shortage of office stock having a detrimental effect on London’s office market. Serviced offices gave ‘breathing room’ to occupiers unwilling or unable to commit to a conventional lease and provided much needed smaller space.
As serviced offices started to boom they grew larger and took more prominent positions in London – the largest ever letting to a single serviced office provider occurred in Q2 this year as WeWork took 168,000 sq. ft. at Moor Place EC2. Almost every quarter for the last three years serviced office take up has increased in London both in amount of space let and transactional volume. Nearly a 10th of all space let in central London goes to serviced offices with 8.6% of all take up last quarter going to serviced offices.
There has also been a large shift in the type of office occupiers look for, from conventional suspended ceilings to a more media feel. The serviced office providers have moved with the times and a huge range of offices are now available. Workspace are bridging the gap between serviced and leased and providing longer licences to occupy (e.g. 2 years) and allowing occupiers to brand their office and do a fit out.
However, Sally Pillow Director at Morgan Pryce has expressed concerns, “as new office stock hits London and the UK economy gains strength, with the election complete and planning permission tightened does this spell the end of the period of growth for the serviced office? The need for serviced offices will surely diminish as rents become more reasonable and conventional office space become more readily available.”
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.