UK serviced office space market

October 12th, 2008 | by Amy Edwards

Last week we spoke to a number of well placed sources within the serviced office industry about the current state of the market.

We uncovered conflicting opinions about the current state of the market at the moment. People are, in my experience, deliberately and perhaps rightly bullish when speaking about their ‘vertical’.  It can be difficult to get an objective view about the state of an industry, especially from those who have a vested stake in it.

Equally, however, no one wants to talk down the current situation, but it does seem the overall demand for office space is falling.

Whether that means a drop in serviced office take-up is a moot point.  From what has gone on in Manchester recently, it would seem to me that revenue per client must certainly be falling, although this could vary from provider to provider.

Clearly if you are offering an office for a pound then you will have a revenue drop!  But a simple observation of supply and demand would indicate this is happening.  This however, could be offset by more people using the serviced option.

However, there does seem to be some evidence that maybe contrary to this theory.  Firstly the fact that the latest results produced by the biggest providers, Regus , MWB and Avanta were positive with all companies reporting an increase in profits and/or enquiries.  Also, Jennifer Brooke, of the BCA, stated that she expected the industry to grow by 3% over the next twelve months.

It should be noted that this premonition was produced in advance of the latest economic turmoil on the financial markets.

In theory the industry SHOULD be benefiting from the credit crunch.

On offer are flexible and affordable workspace solutions, which is what companies are increasingly seeking in times when they do not wish to commit to a restrictive lease.

I am wondering whether that last two weeks of economic crisis mean that the industry will now not grow at the 3% Jennifer thinks it will.

It is becoming increasingly hard for companies to secure loans, meaning that companies cannot carry out expansion plans as easily.  Also, start ups, one of the major users of serviced offices, will either be dissuaded to even form a business in the first place or will not be able to secure the initial capital.

In summary it is clear that making accurate economic forecasts is a notoriously difficult task to undertake.

No one really knows how bad the economic climate will get, whether we are in for a full-blown recession or not.  I tend to use the completely unscientific method of monitoring the Regus share price as a barometer of the industry.

How do you think the service office market will perform in the next 12 months?

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