Nine month figures show a nearly 20% year-on-year increase and a trebling of revenue over the past three years
Enquiries soar and occupancy levels rise significantly following Brexit vote
Figures announced today by leading serviced office provider, Office Space in Town reveal that 2016 revenue is set to grow nearly 20% year on year to £17.25 million – a trebling of revenue over the past three years. The figures also reveal that the numbers of enquiries from prospective tenants and occupancy rates across their £160 million national portfolio of serviced offices have increased significantly since the UK’s vote to leave the EU. Office Space in Town’s figures indicate that demand for flexible office spaces has increased in the wake of the Brexit vote, despite concerns that office occupancy rates generally would slump.
The nine month figures for 2016 indicate a sustained increase in revenue – up from £14.47 million in 2015. This continues the promising year on year growth in revenues experienced by Office Space in Town in previous years; in 2015 turnover climbed by 20%, up from £12.08 million in 2014. In 2014, turnover more than doubled on 2013’s figures, rising from £5.76 million.
In the three months since the EU referendum, Office Space in Town has seen appetite from prospective tenants increase considerably; following a short-lived fall (9.4%) in the immediate aftermath of Britain’s vote to leave the EU the number of enquiries recovered significantly, increasing by 4% from July to August and by a further 16% from August to September, taking levels to a two-year high, with modest projections putting the 2016 year on year increase at 12%.
The period since the vote in June has also seen occupancy levels across Office Space in Town’s portfolio increase, with offices in the Capital nearing capacity; since the referendum vote, occupancy levels have climbed on average by 6% across Office Space in Town’s six London serviced offices from Liverpool Street in the City to Mayfair in the West. The group’s most recently completed buildings in the Capital have seen the greatest increase since the vote in June, with occupancy levels rising by 8% from July to September in Office Space in Town’s Mayfair office. Occupancy rates across Office Space in Town’s serviced offices also remained consistently high in the lead up to the vote, at close to 90% in June.
Alongside high occupancy rates across the portfolio, the multiple revenue streams enjoyed by serviced office providers are also responsible for driving the strong 2016 figures for Office Space in Town. The incremental revenue from stable contracted income from rent and IT support to more variable income streams such as meeting room charges, have played a significant role in boosting the bottom line.
Office Space in Town’s promising figures come against a backdrop of continued strength in the UK serviced office market, which has experienced rapid growth and sustained a high level of demand in recent years, growing by 31% since 2008. A report commissioned by Office Space in Town earlier this year from leading consultancy Capital Economics, revealed that the UK serviced office sector is projected to increase in value significantly by 2025, to £62 billion on conservative projections and £126bn on more optimistic forecasts.
The sector’s increasing appeal to tenants has also seen it rapidly emerge as an attractive subsector within the commercial real estate market and a sought-after opportunity for institutional investors, which are now beginning to regard the serviced office sector as an asset class in its own right.
Earlier this year, Office Space in Town announced that Kailong, a leading Chinese real estate asset manager, had invested in the firm’s two London serviced office joint ventures. Kailong took a majority stake in in OSiT’s first joint venture, LSOI, replacing global real estate investors, Forum Partners, which initially backed the serviced office vehicle alongside OSiT. The Shanghai-based firm also took a majority stake in OSiT’s second joint venture, LSO II, in which Forum Partners remain an active partner and shareholder.
Giles Fuchs, CEO of Office Space in Town said:
“Despite concerns that office vacancies would increase following Britain’s vote to leave the EU in June, it is clear from our figures that demand for serviced office space is continuing and increasing. The number of enquiries Office Space in Town has received from prospective tenants and our rising occupancy levels since the vote show that our confidence was well placed.
The serviced office sector tends to be counter-cyclical; in times of uncertainty, businesses look for flexibility, whilst they assess the ramifications and establish how to navigate new waters. With more and more businesses seeking this solution in the wake of the referendum vote, it is unsurprising that the serviced office sector is seeing strong demand.”