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Go big or go home? Serviced offices launching buildings to let on a floor-by-floor basis, only to large tenants

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The traditional serviced office model revolves around a high density of SMEs occupying pre-partitioned floor space. This has a number of advantages for the operator.

They can achieve a higher return per occupied workstation through creative use of desk density in smaller suites.

Void management is also easier, in that a high occupancy of a building can be maintained through the re-sale of smaller offices that are, in theory, much easier to let due to positive start-up / SME demand.

Drawbacks are correlated. Smaller units are quite likely to be filled by organizations seeking the ultimate flexibility of contract length, putting greater pressure on the operator to continually fill small vacant stock in order to achieve occupancy levels capable of driving positive return for the building as a whole.

Historically, this ‘churn’ has been off-set through operators seeking large anchor occupiers to rent one significant piece of space off-plan, thus easing the burden of volume-selling the remaining smaller units due to income already secured.

That said, these large pieces of space tend to be ‘time-limited’ in that if they are not let to a single company within a prescribed period of time, they are earmarked for being chopped up and sold piecemeal.

Since the back-end of 2016, however, operators are increasingly willing to come to market with serviced offices aimed exclusively at the large occupier.

The likes of Business Cube are spearheading the trend, seeking companies of 50 people or more and selling on a ‘floor-by-floor’ basis only.

Business Cube’s successful litmus test was their offering at Worship Street, EC2, where 5 floors of serviced office space were put on the market with a single-minded goal of letting the space to 5 separate companies on 2 to 3 year terms. The building reached 100% occupancy within 4 months of ‘official’ launch.

(Proportion of floor at Business Cube’s Worship Street building)

The serviced office market is currently strong, and an increasing number of large clients are seeking fully-inclusive office contracts to accommodate them for the long-term. It is only logical that operators respond to this demand and reap the benefits – but is it wise to put all your eggs in one basket?

Craig Haggerty, Director of Business Cube, is happy that his eggs, alongside his basket, are safe. He says:

“From the very beginning, Business Cube's focus has always been to create strong relationships with all our clients. We have taken some tenants from 3 workstations to 110, within 4 years. Increasingly, we are seeing demand from larger clients seeking a turnkey office option with the benefits of what a niche provider can offer in terms of both service and flexibility of term. In addition, with the advent of rapid tech and media growth, start-ups no longer require smaller offices, but instead they are seeking larger open plan environments, complete with meeting rooms, breakout areas and kitchens.They are usually very determined in their vision for the future of their business and know what they want. They already have the necessary investment to react to their aggressive growth plans, and that works symbiotically with our model too. For us, having less occupants within our buildings may seem like a risk to some, but the rewards of being able to provide a proactive and diligent service despite being a relatively small Provider really makes it worthwhile. We feel there is firm logic behind our decision and the facts are testament to that. Use of communal services such as bathrooms and meeting rooms no longer become points of contention, as we create these facilities within our client’s individual demise. For us, tailoring the office space to the client's vision is key. We feel clients enjoy the design journey with us and no doubt become as emotionally invested in the building as we do, and a happy client will stay with us for the long term. We see the co-working environment as a great way to start a Company, to nurture ideas and decide a strategy, but once a business becomes mature, more consideration needs to be given to how the business can perform in the long term. What are the working processes the business needs to progress? What is the vision you picture when looking for the new home for your business? Our mission is to create that with clients. They set the ground rules and we implement them. That can only be a win/win situation.”

The next building is already in place, with three 6,000sqft floors on Old Street available, again, only to single occupiers. Each floor is geared up for accommodating 90+ desks.

Go big indeed!(Penthouse floor at Business Cube’s newest building on Old Street)

(Main section of open-plan floor at Business Cube’s newest building on Old Street)

(Compiled by Michael Dubicki, Director of Business Development at Flexioffices - www.flexioffices.co.uk 020 7061 3620 07432 128 618)

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