Business centre expansion – what happens now?
In this month’s RICS magazine ‘Modus’ their Chief Economist, Simon Rubinsohn commented that he is encouraged by the results they are getting on tenant demand to occupy space. He went on to say :-
‘ We may be only measuring sentiment, but this has consistently proved to be a good lead indicator of future economic activity. Critically, members are telling us that demand for real estate is now increasing in all parts of the country. That doesn’t, of course, mean that everyone is experiencing a material uplift in business. On the contrary, it is still tough in many areas and intense competition means that profitability may remain under pressure for some time. But even in those parts of the country that are lagging in the current cycle. I would suggest that there are now some glimpses of light at the end of the tunnel’
Where does this leave Business Centres?
In my experience, I have had two clients who were considering serviced offices at the end of last year for their empty space but have now found ‘conventional’ tenants for their space. Landlords always seem to prefer these to serviced offices when times are good.
This is against a backdrop of much improved confidence in the Business Centre market with good occupancy and an upward trend in rents. There appears to be more of an appetite for expansion in the sector
At the Business Centre Association conference last month Justin Urquhart- Stewart commented on the economy and how everything had changed for the positive since January. This is undoubtedly true in the property world and we are now seeing speculative development re-commence in some regional cities.
With the growth in occupier demand, it may become more difficult for Business Centre operators to secure space on management agreements or on turnover related agreements, mainly due to the attitude of landlords and their agents. For those Business Centre operators who are thinking of expanding, they should plan to do so now as it will become more difficult as the economy continues to recover.
The other side of the coin is that if it does become more difficult to create new space and that this creates an imbalance between supply and demand, existing Business centre operators can look forward to increased occupancy and higher licence fees