A new report on the City of London’s serviced office market is optimistic for the future the sector 

City of London

Double demand

The City of London serviced office market is fast maturing and could double in size in the next ten years according to a recent report. Other key finding include:

  • There are 2m sq ft of serviced office space in the City spread across 85 centres
  • The average length of stay is between 18 and 24 months with some occupiers staying much longer (three to five years is not uncommon)
  • More centres are expected to open in the west and north west of the City fringe with the arrival of Crossrail at Farringdon by 2018. We’ve already seen evidence of this with Avanta Serviced Office Group acquiring a new centre in Old Street’s Tech City.

Serviced offices and the agile occupiers in the City of London was prepared on behalf of the City of London Corporation by Ramidus Consulting . Green Kinnear Real Estate is proud to say that we had a hand in its production. As the Serviced Office Specialists we were asked to give an insight into the market within the Square Mile.

Future trends

Looking to the future, the report identified some likely trends:

  1. Demand will grow

The main sources of demand will be from:

  • small, often tech-based businesses
  • corporate occupiers that need ‘on-demand’ space
  • SMEs switching from conventional leases into more flexible space
  1. A broader range of offers will emerge

Providers are expected to continue to differentiate what they offer in terms of quality and service. A strongly tiered market is likely to emerge. Also, the ‘flexible space’ market will grow with more managed space and co-working space.

  1. Supply constraints could inhibit market expansion

It is felt that operators are unlikely to acquire office space while rents are high, as they are currently. Once rental growth settles though, a further expansion is likely to take place.

  1. More landlords will embrace serviced offices

Property valuation has traditionally favoured strong covenants over short-term income. This may be changing though. The report shows that serviced office occupations are stable and 30% of space is occupied by corporates. As a result, more landlords are expected to embrace the market, especially in joint ventures such as management agreements. An example of a joint venture between a landlord and an operator (albeit in W1, not the City) is the deal we brokered at 25 Sackville Street.

Our conclusion

We think this report is a useful indicator of what is happening in the vibrant central London market. We are now seeing glimpses of similar trends across the UK, particularly in the major cities.

A copy of the report can be found here: Serviced offices and agile occupiers in the City of London.

What are your thoughts about the state of the serviced office market in and out of London as we head into 2015? We’d love to get your opinion.

If you would like to have a confidential chat about serviced office centres call us now on  020 3427 5679

GKRE – The Serviced Office Specialists

By Will Kinnear – 22 Oct 2014