BCA MarketWatch: July 2014

BCA MarketWatch: July 2014

 The Business Centre Association regularly provide information on how the sector is performing. Below is the latest information.

 Summary:

Meeting rooms and virtual offices performing well

  •  More startups seeking space, including shared facilities
  •  EPR continues to have a negative impact – especially on industrial space
  •  Corporates seeking longer leases on flexible contracts
  •  Business optimism encouraging some clients to vacate serviced space

Market Performance:

England

The previous edition of Market Watch (March 2014) suggested positive performance indicators, partly as a result of increased business confidence in the serviced office market.

This optimism has continued which is benefiting flexible workspace operators. However this increased confidence is also encouraging some businesses to vacate serviced space in favour of longer leases,further supporting the flexible space environment that nurtures business growth.

Across the UK, operators report an increase in small businesses and start-ups, which is fuelling demand for small space including shared options.

Operators are also reporting demand for meeting rooms and virtual offices. One UK-wide operator commented on a “strong quarter” for meeting and conference space,

currently 15% ahead of budget for the quarter.

It’s worth noting that a number of operators have reported a more diverse marketing approach. Many still rely on brokerage channels,however some are seeking alternative means of attracting footfall – including local promotional activity and improved signage to encourage walk-ins.

London operators continue to report excellent performance across a number of indicators. The City of London is generating strong demand with satisfactory pricing

while in Covent Garden the feedback is “overall very positive”, amid reports of higher rents and consistently high levels of occupancy.

One Central London operator has noticed a significant drop in conversion rates, suggesting lower quality of leads. Despite this, they described Q2 as “steady” with enquiry levels running high.

Outside of London, overall performance varies. Members in the South East report variable demand with relatively stable pricing,while Surrey has been described as “constant”. In Potters Bar, one operator reports exceptionally high performance.

In Milton Keynes, the office market is reportedly “buoyant” with pricing stabilising, although industrial space remains a challenge due toEmpty Property Rates legislation. This has led one operator to switch their focus from industrial to office.

In Birmingham, performance is mixed. The area continues to be competitive and there is ongoing pressure to lower workstation rates.

One operator has found that the quality of enquiries has dropped and as a result rates and occupancy have suffered.

However, this is at odds with the broker community, which report a general increase in rental values in Birmingham.

Further north, Manchester is said to be a “hotspot”. In Warrington, one operator has seen a drop in enquiries compared with last year but reports an overall uplift in lead quality.

Activity is said to be down slightly in Q2 compared to Q1, which corresponds with other Warrington reports, although generally occupancy is satisfactory.

Leeds is said to be “quiet” in terms of leads/enquiries but there is relatively good customer retention and expansions.

In Hull, one operator reports a slight increase in enquiries from a mixture of industries – mainly professional services and logistics. Although prospects are still pushing for deals,rental values are consistent – mostly from companies seeking smaller office requirements. Virtual office requirements have improved, while coworking enquiries remain steady.

Moving away from serviced space, a number of operators report a good level of meeting room and conference sales, with demand for virtual offices also picking up.

A general increase in enquiries from startups is leading to more demand for flexible shared space and coworking options. However this market is still relatively youngand comes with its own challenges; specifically, one operator reports difficulties filling its North London shared office facility, and recognises a specific strategy is required to make the space work.

Overall, despite mixed performance in regional locations, operators in England are positive and expect improvement – although the impending summer holidays may slow things down further.

Scotland

In Aberdeen, reports tend to contrast. One operator tells of a buoyant market with high demand that exceeds supply, and a large increase in demand for flexible space including virtual offices, hot-desking and meeting room hire.

Another operator in Aberdeen reports a drop in enquiries with low interest in June – which is expected to continue owing to the summer holidays.

The market is still dominated by the energy sector although competition is intensifying from large out of town Business Parks, which are attracting more oil and gas companies.

In Edinburgh, the market is reportedly positive despite the uncertainty created by the forthcoming referendum, with enquiries remaining relatively high.

UK wide – Broker Update

The broker community reports a significant rise in the number of large deals won in London, with large corporate companies deciding to take a more flexible option for project/swing space.

Across the UK there has been an increase in requirements for 1-4 workstations, with more established SMEs as well as start-ups coming to the market.

There is also a rise in clients committing for longer contracts, up to 24 months.

As we have seen in previous Market Watch reports, the serviced sector is attracting clients from right across the business spectrum.

Large corporates are not only using it for swing space but also as a flexible alternative to conventional space.

The broker community reports high availability in the North of England with key cities like Leeds and Edinburgh offering competitive rates and rent-free options to secure deals.

However in general, brokers report “a continued improvement” across the UK, adding that clients are now willing to pay more in order to secure the right space for their business at the right time.

There have been a number of new workspace locations with operators expanding their portfolios across the country. Challenges remain in Bristol, Milton Keynes and Reading, which are described as highly saturated with low occupancies.

In terms of sales cycle, the broker community reports a fairly consistent 2-6 week process. A lack of availability in some areas has pushed quick decisions, particularly in London.

There has also been an increase in leads for Q4 with clients wanting to gather information early, which is promising for the coming months.

Trade Suppliers – Technology

Since March, the BCA has received reports of new installations of business centre systems in Yorkshire, Midlands and Scotland with an extensive pipeline of new business pending, particularly in the South and London areas.

Notable Highlights

Increase in demand for meeting rooms and virtual offices

  •  More startups and small businesses; shared facilities performing well
  •  Large corporates recognising long-term value in serviced space
  •  Operators identifying new marketing methods

 Issues / Challenges

Startups and small firms often slow to make decisions

  •  Some larger clients moving out from serviced into conventional leased space
  •  Energy firms in Aberdeen attracted to business parks as opposed to serviced offices
  •  Coworking requires a specific approach to ‘make it work’
  •  Impending summer break may slow enquiries and deals

Further Information.

 If you require any further information about Business centres or are considering setting up a Business Centre, please contact me on 07879485898  or thomas.m.stokes@gmail.com or visit my web site www.thebusinesscentrespecialist.co.uk

About the business centre specialist

Tom Stokes is the UK's leading specialist in the development and management of Business Centres, Managed Workspace and Serviced Offices. A Fellow of the Royal Institution of Chartered Surveyors (FRICS), with nearly 40 years experience in property and the majority of that experience in the flexible space market, he comes with a wealth of experience. Quite simply, there is nothing in this sector which he has not experienced. In 2000, he set up Evans Easyspace, retiring from the company at Easter 2011. He built up the company from scratch to having 58 business centres throughout the UK and was the leading provider of new, quality small offices, workshops and self storage units which were let on genuine easy in, easy out terms. The Evans Easyspace brand is highly respected and the company is also one of the most efficient in the sector. He is a firm believer that small businesses want flexibility and that is what he can advise on and deliver in a way which will help your business grow. He is also a past Chair of the Business Centre Association (bca), having joined the Board in 2003. He is a life member of the bca and still advises the bca on certain issues.
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