BCA MarketWatch: September 2014
The Business Centre Association provides a quarterly update on market trends.
This is provided by BCA members providing a summary of overall business performance including factors such as lead flow, rental value, quality of enquiries and any particular challenges they have faced over recent months.
Seasonal lull due to July/August holidays, generally strong return to form in September
- Office-to-residential conversions leading to closures and “scramble” for space in Greater London centres.
- Central London continues to perform well, with low availability and high demand
- Cities in Midlands and Northern locations improving – notably Birmingham and Leeds
- Manchester again singled out as a hotspot; Bristol struggling with high competition and low pricing
Members report a “buoyant” market in Central Oxford with high occupancy levels and stable lead generation, although out of town areas have been more difficult to maintain. Milton Keynes is described as “slow”, as is Bournemouth, and in Reading, the area has become competitive with low pricing that’s creating a difficult trading environment.
Birmingham is said to be “turning a corner” as operators report an improvement in quality of leads and conversion rates.
Further north, Chester and Warrington are experiencing a “good” level of leads and quality enquiries, although occupancy is down slightly. The increase in enquiries is thought to be related to the pending closure of a large Warrington centre. The Wakefield market is said to have “improved” over the last three months compared with last year.
In Liverpool, members report consistent pricing while Manchester is considered a “strong” market, with low vacancies and good pricing, which has been noted in previous MarketWatch reports. Leeds has received positive comments in terms of rates and occupancy, which is a marked improvement compared with previous reports earlier this year.
The continued challenge in northern areas is pricing, and most operators continue to report clients with low cost expectations and difficulties obtaining “reasonable” pricing levels.
Apart from seasonal decline in August, meeting room sales in specific locations are performing well – notably in Liverpool, Warrington and Wakefield.
London, Greater London & Hertfordshire
Despite a slight seasonal decline in enquiry levels during August and September, operators in London report ongoing good performance and pricing. However, there has been a slight drop in the quality of leads in the West End. Performance indicators for The City remains positive and overall, Central London continues to attract high demand with strong occupancy rates, with demand still outstripping supply in specific locations.
In Greater London areas, some members have noted an improvement in key performance indicators – including a slight increase in licence fee, new client move-ins, and internal client expansions. A better quality of enquiries and improved viewing techniques seems to be making up for a slight drop in enquiries.
In some cases, this is fuelled by recent changes to government legislation, which temporarily dispenses of the need for formal planning applications for office-to-residential conversions.
Members in the Greater London area – particularly those in suburban areas – report that development has already started in some instances. This has led to an increase in value and enquiries for nearby centres. An expected “scramble” for new space in these areas is likely to further drive up demand and quality of demands for operators based within close proximity to properties undergoing redevelopment.
Overall, virtual office and meeting room sales in London and Greater London areas have been favourable.
In Edinburgh, members report a “generally good” quality of enquiries, currently on a par with 2013. Rental value varies significantly as does the type of client – many are based within the business services sector although there is enormous diversity with many different industries represented.
Operators in Cardiff report a slow-down in the market over the last few months, with primarily small enquiries. There have been some internal expansions, but unfortunately a number of these clients have vacated and moved on to leased space. The Cardiff market is proving difficult, with some operators considering reducing their rates in order to lift occupancy levels.
The broker community reports “strong” summer enquiries despite the seasonal lull, with an overall good quality of enquiries. There has been a noticeable rise in clients looking in advance – with projected start dates from November through to 2015.
Positively, clients appear more knowledgeable about the flexible workspace market and are keen to see as many options as possible. While this leads to the inevitable price comparison exercise, there is a wide range of companies keen to occupy serviced offices – from startups to large corporates – who want flexible workspace for various uses including swing space, project offices and longer-term accommodation. There is a general uplift in confidence with more companies, particularly smaller firms, signing-off new projects and generating more enquiries.
London continues to attract high demand, and low availability in Central areas is also driving up price. Given the increase in client knowledge of the market, there is a general acceptance that, in high occupancy areas, clients need to move fast in order to secure their preferred location. High demand for specific areas including King’s Cross, Euston, Shoreditch, West End and Soho – coupled with low availability – means clients are ready to consider other areas nearby in order to secure the best solution.
Outside of London, however, the pace of take-up is slower and lower occupancy rates means clients have some room to negotiate for lower prices, including rent-free periods which are still on the table. Bristol has been singled out as a “challenging” area with high competition but low enquiries and occupancy, leading to lower pricing. Newcastle and Leeds are both seeing a slight improvement in terms of new and longer-term deals.
- Birmingham and Leeds “turning a corner”
- Major northern cities, especially Manchester, performing well
- Brokers report rise in clients looking for advance start dates – November, December and 2015
- Clients are generally more knowledgeable about the market