Short supply of conventional office space has caused the serviced office market to adapt, providing high quality, creative space whilst retaining its characteristic flexibility.
As London benefits from vast swathes of foreign investment and a steady growth of start-ups and SMEs, demand for office space in the capital has risen to an all-time high. With vacancy levels at a 14 year low, the cost of office space across London has risen dramatically. On average, renting office space in one of London’s skyscrapers has risen by 10% in just 6 months! This is the fastest growing commercial property market in the world and the 2nd most expensive in the world, behind Hong Kong.
The rising appetite for flexible, serviced office space
These factors have contributed to a rising appetite for flexibility, which has seen many businesses of all shapes, sizes and sectors opting for serviced office space, instead of a longer conventional lease. The growth in start-ups and SMEs has seen demand shift from a traditional corporate style to a more creative style office space. The serviced office market is evolving and adapting to accommodate these changing trends. Gone are the days of the bland, soulless serviced office; these days, the vast majority of serviced office providers allow occupiers to personalise their space.
Boutique tech hub feel now available to all
Demand for creative and boutique style serviced offices – which offer a community spirit and tech hub feel – have significantly increased and supply has duly followed suit, offering businesses an environment they would once have had to spend thousands of pounds to create themselves. WeWork have opened 5 new business centres, offering a platform for creators with a mix of beautifully fitted co-working and self-contained office space. The Office Group have also added to their impressive and ever growing portfolio. As more and more businesses seek the wow factor, exclusive serviced office space is also on the rise, with business centres now occupying space in landmark buildings such as The Shard, The Gherkin, Tower 42, The Lloyds Building and Heron Tower.
What about a traditional sublet instead?
The alternative to a serviced office remains a conventional sublet or lease assignment. Despite the low vacancy levels across the conventional office space market, more and more landlords are open to offering conventional office space on more flexible short term leases of 12 to 24 months, which historically would have been more cost effective than a serviced office.
With the rise in both rent and business rates and the fact that serviced offices offer fully-inclusive pricing (rent, business rates, service charge, utilities, reception, furniture, fully-stocked kitchens, break-out areas, free tea and coffee, daily cleaning and building maintenance are all typically included), the difference in the overall cost between a serviced office and a conventional sublease or lease assignment is now minimal. In fact, having undertaken various cost comparison exercises recently, the cost of a conventional sublet or lease assignment is increasingly more expensive than a serviced office, especially in prime locations such as Mayfair and parts of the City.
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