Tom Stokes FRICS, former Managing Director of Evans Easyspace and a consultant to the flexible space sector, discusses the industry’s lack of mainstream recognition at regional level and asks, what must be done to promote the serviced office market and educate traditional property professionals?
In the past year there have been a number of reports about the flexible space market by large property consultants.
DTZ published their reports on ‘The Coworking Revolution‘ and ‘How You Work.’ Deloitte reported on ‘The Growth of Serviced Offices‘ and whilst about London, its conclusions could have applied to most parts of the UK.
All this would suggest that the flexible space market has turned a corner and is being accepted by the mainstream property industry.
That is far from the truth.
At a local level, and outside London, when a client requires a valuation or a report on their property the local surveyor clearly does not understand the serviced market and questions why they are not offering more traditional FRI (Full Repairing and Insuring*) leases.
The property market has strengthened since the end of the recession with more occupiers in the market. Coupled with little development outside of London, and the availability of property shrinking due to offices being taken off the market and converted to residential, it has caused a shortage of supply and resulted in the property industry reverting back to its preferred position of requiring FRI leases.
Yes, there is evidence of shorter and more flexible leases. But these are a long way short of what the flexible space market is offering.
The flexible space market has changed considerably over the past few years and is continuing to evolve. This is driven by technology, occupier demand and a new generation of workers entering the workplace. Many operators are now struggling to catch up.
So where does this leave the traditional property market? In my view, it is falling further behind what occupiers actually want and this could hinder the growth of our sector.
To ensure that there is a supply of suitable properties available for our sector to facilitate growth and to ensure that there is a strong market for owner occupied business centres, it is up to us all to promote the flexible space market and educate the property professionals.
*FRI lease: An abbreviation of ‘Full Repairing and Insuring Lease’. An FRI lease imposes full repairing and insuring obligations on the tenant, thereby protecting the landlord from the cost and liability of insurance and repairs.