- Central London has the highest density of serviced offices anywhere in the world, and there is still plenty of room for growth
- However city transport is expensive and often inadequate, and there is significant potential for flexible workspace in second tier areas
- One such opportunity is a 50,000 sq ft development in Brixton, yet there has been “a deafening silence” from flexible workspace operators
By Jonathan Price, pioneer in the field of business centre investment. He was a co-founder of the world’s first public fund for the industry, and shares over 25 years of financial expertise and knowledge as a consultant and a lecturer at the London School of Business & Finance. Jonathan can be reached at [email protected]
London is the leading international financial centre in the world. It is also a world leader in serviced office space, with central London having the highest density of serviced offices anywhere in the world. The reasons for this range from the need for flexibility among financial institutions to the peculiarly inflexible lease structure favoured by landlords of conventional office property.
So it is no surprise that WeWork chose London as a major part of its international expansion plans.
A question often asked by investors looking at the serviced office industry is, how big can it get? Can it get to 10% of total office space or 20% or what?
This question is very difficult to answer precisely, and the answer may vary from city to city, but I have always said that serviced offices could easily get to 25% of total office space and since we are nowhere near that number today, why worry? It is however a worthwhile question, and if the investor is not satisfied with my first answer and is interested in drilling down further, I would go on to highlight the potential for growth that is present in our suburbs and outer city areas.
City transport is so horrible and so expensive in many places, including London, that people would strongly prefer to work near to where they live, but the serviced office work hasn’t really focussed on these second tier areas.
A good example of this, and the real point of this article is International House, London SW2.
That postcode makes it sound as though it is next door to the more famous SW1 of Westminster and Big Ben, but it is not. SW2 is in fact Brixton, an area south of the River Thames, best known last century for its Caribbean immigrants and race riots in the 1980s. Things have changed since, and the area has gentrified and is now sought after by trendy millennials, however it lacks business space. Until today, the only business centre in Brixton is in a bad conversion of the old Brixton synagogue (anyone else know of a business centre in a synagogue? – there can’t be many) but this is about to change.
The Labour controlled council of the borough has recently moved into shiny new headquarters and is seeking to convert a former council office block, International House, into a serviced office and is openly seeking an operator to take on the building and thus increase the amount of business space available in the area.
Now this isn’t a 100% straightforward deal, because, as I said, the council is Labour controlled and would like to see a certain amount of space given over to ‘affordable’ workspace. This shouldn’t be an insurmountable obstacle, however, because it is a big building – I estimate around 50,000 sq ft, and the location is, in my opinion, absolutely brilliant. It is close to a tube station and dozens of buses go past the front door and there is practically no competition anywhere nearby. The area is vibrant, with high population density of young economically active people, and the area is crying out for a serviced office.
And yet there has been a deafening silence since the council made its announcement. Let’s see if any of the key players is awake to the opportunity that is staring them in the face.