What can others learn from London’s serviced offices?

 —  Article by JLL Staff Reporter
Credit image: Shutterstock
Credit image: Shutterstock

With today’s workspaces needing to be as flexible as their employees, serviced offices are increasingly fitting the bill. 

Serviced offices charge their users per work-station and not per square foot, leases are short and their design is modern and open. It’s common for companies and individual employees to share space with other companies and moving in can be an almost instantaneous process.

With all these popular benefits on offer, the office model has struck a chord not only with small, fast-growing firms but also larger occupiers that are even prepared to pay an extra 25 percent more than on old-style leases.

“It’s a trend that’s born out of optimism and excitement in the city,” says Charlie Wade, Director of Tenant Representation in JLL’s London team. “Companies are growing fast and think they might need more space at some point. Growing quickly plays perfectly into the hands of the serviced office model.”

In contrast, five-year-minimum lease terms and fixed service-provider contracts restrict a company’s ability to respond to growth.

Dan Brown, Associate Director, JLL Serviced Offices, London, agrees: “Serviced offices have become part of life because they give such great flexibility. Companies can upscale, down-scale, change their service level and have space to collaborate with their neighbors.”

Here to stay

The UK’s serviced office market, concentrated in London and to a lesser extent in other big cities and the Thames Valley, is the most established in the world. But it’s a business model that’s also becoming popular in Europe and the USA.

“Leasehold will always exist,” says Brown. “But there’s room in the market for both leasehold and serviced offices. Companies now have a choice of solutions.”

And with American venture capitalists backing the sector and targeting the UK, we’re likely to see even more serviced offices in London. “They are definitely here to stay,” he adds.

Cooler culture

The first adopters were the tech companies, start-ups, and corporates who wanted to accommodate special project teams. But now all sectors want serviced offices: Even merchant banks are moving into this space.

“Companies are looking to create a culture and environment that allows their employees to thrive” says Wade. “People choosing serviced offices are less sensitive to a specific location and more interested in the design, fit-out and who they’ll be mingling with in the break-out room. Serviced offices can give that fun, open collaborative feel.”

Tenants can choose from a menu of facilities, such as bandwidth size, to create a bespoke office – and see at a glance what they are paying for, and how much. Rent, individual services and utilities are all broken down and itemized per desk making costs instantly transparent to occupiers.

“Most of our clients in London take a 12-month term with a six-month break so they can get out of the contract if they have to,” says Brown. “But they tend to stay for two, three or four years.”

No upfront costs and lock-ins

Freedom from upfront costs is another big driver for this trend. Initial fit-out costs have become prohibitively expensive for SMEs and unnecessarily expensive for larger firms.

And whereas serviced offices used to make economic sense only for companies with a headcount of less than about 10, now employers of 30 to 50 people find them cost-effective, due to price hikes in fit-outs, rates, service charges and dilapidation charges.

Today’s flexible working practices of hot-desking and home-working, prompted by the efficiencies offered by the digital revolution, means more employees are willing to forego that emotional attachment of having their own personal desk in return for an office space that is easy to reach and ready to use. And that is the big selling point of serviced offices.

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