Serviced office providers dominated office deals in Birmingham city centre in the second quarter (April to June) of 2018, taking some 55% of the total space transacted, according to Birmingham-based independent commercial property agency KWB.
Q2 2018 saw 93,927 sq ft let to serviced office operators, over five deals, equating to 55% of total transactions. Last year (2017) serviced offices accounted for 20% of the total space transacted. In the last 18 months (2017 and Q1 and Q2 2018), serviced offices have been responsible for 313,079 sq ft, 24%, of total take-up.
“The growth of the serviced office sector shows that occupiers are being relatively cautious in allowing their property risk to be taken by a third party, but with so much space going to serviced and managed offices, are we headed for the London model where the majority of requirements under 5,000 sq ft go to serviced offices?” asks Malcolm Jones, a senior member of KWB’s Office Agency Team, writing in KWB’s Q2 2018 Birmingham Office Market Report.
WeWork is now Central London’s largest occupier with some 2.6 million sq ft of floor space.
The largest office letting in Birmingham in Q2 was to serviced office provider, BE Office, a first time occupier in the city, which took 38,162 sq ft at Somerset House; while the third biggest deal was to Instant Managed Offices with a letting of 21,232 sq ft at 2 Colmore Square.
Mr Jones continues: “It is understood that the space taken at 2 Colmore Square is on behalf of Highways England and underscores Instant Managed Offices’ business model of taking traditional leases on behalf of a single occupier which then takes a shorter licence on the space. Last year (2017) Instant Managed Offices took almost 50,000 sq ft in four deals for occupiers, with HS2 believed to be driving three of those deals, as well as this quarter’s Highways England letting.
“In light of the success of serviced and managed office providers and the demand for flexibility from office occupiers, more landlords are now willing to consider alternative leasing arrangements, such as serviced office licensing models, as long as they get the premium they want.
“Given that occupiers are still in search of high quality office space, and space that is not refurbished is now considered to have little appeal, they will generally pay the premium that the landlord expects,” concludes Mr Jones.