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Office Freedom
Office Freedom
  • 2 Minute Read
  • 28th March 2008

Serviced-office outfits open new space amid financial turmoil

The growing specter of recession in the US may have caused developers and investors in the UK to abandon their expansion plans, but it has had the opposite effect on serviced office providers.

Instead, they are trawling for office space in the City of London and Canary Wharf in anticipation that the US banks and other financial services occupiers will shed jobs over the next six months and need short-term accommodation until the downturn subsides.

In April, Abbey Business Centres is due to open 28,000 sq ft of serviced offices on floor 37 of One Canada Square at Canary Wharf. This is in addition to 28,000 sq ft it has at the Swiss Re Tower at 30 St Mary Axe.

It has followed the example of MWB Business Exchange, which has opened 34,322 sq ft at 55 Old Broad Street and 18,500 sq ft at City Tower.

Regus has also confirmed it has been approached by financial services occupiers in the City that want to trim surplus office space in the months ahead.

Take advantage

For small and medium-sized firms, the growth in this sector since the credit crunch means there now is a wider choice of serviced office space to occupy than ever before.

‘There are a lot of serviced-office providers who are positioning themselves to try to take advantage of what has been happening in the US over the last few months,’ says Julie Calder, managing director of Abbey Business Centres, which now has 13 centres across the UK and 4,000 workstations.

Financial occupiers are driving this demand because they want more flexible space amid financial uncertainty.

PricewaterhouseCoopers, the accountant, says it expects to be targeting short-term office accommodation over the next year. It is moving 6,000 staff to More London in 2010 for its main operation, but says that serviced-office accommodation is rising up the agenda to accommodate its subsidiary offices.

Paul Harrington, PWC’s real estate director, says that serviced-office providers have begun to tailor their services towards traditional corporate occupiers, who until now have only ever considered long-term leases.

But since the beginning of the credit crunch in August, many of those occupiers have had to reconsider their position.

‘There is a real opportunity here for those serviced-office providers who can prove to corporate occupiers that they can provide as good accommodation as some of the smaller landlords out there,’ says Harrington.

‘They could even start to challenge some of these landlords if they play their cards right.’

Harrington says that, for the last year, PWC has been leaning towards the use of serviced offices for many of its subsidiary businesses.

‘Quite often it is better to go for a two- or three-year lease while you test the water to see whether a certain enterprise is going to work. Then, when you have built up that base, you may later look to a more long-term arrangement.’

And it is this flexibility that makes serviced offices appealing to SME’s too. Committing to conventional space can be too big a financial burden.

Eye of the storm

Peter Cookson, managing director of corporate outsourcing at Regus, says there are striking similarities between now and the internet crash in 2001.

During that period, technology companies that had taken space, particularly in Thames Valley, were hit hard. This time, it is the financial services sector that is in the eye of the storm, but Regus expects the impact to be the same.

‘In 2001, you had all these technology companies who suddenly had a lot of space on their hands that they didn’t need,’ says Cookson.

‘What we did then and what we are doing now is talking to these companies to see if we can let their space to our clients. It is fair to say we have been getting a lot of enquiries from corporate occupiers who need to scale back their space in the City.’

For SME’s looking for a prestigious address in the City, the fallout from the credit crunch means now is a good time to get hunting.

By Mark Shepard, Property Week, 14.03.08