The recently published annual UK Occupier Satisfaction Index 2009 ¹ depicts the business-world’s general malaise with traditional office landlords and leases.
Whilst recognising that some Landlords have become more flexible, there is an underlying belief that this volte-face has been forced upon them by the recession and that it may not remain when market conditions improve. Abbey Business Centres believe that many of the issues highlighted by occupiers simply don’t arise for serviced office clients.
Traditional occupiers point to a lack of understanding from their landlords, particularly in these troubled economic times. Downsizing has left occupiers paying for empty space and some landlords still refuse to allow sub-letting. In addition, upwards only rent clauses exacerbate the feeling of ‘them and us’.
In stark contrast, the flexible nature of serviced office agreements mean that clients are rarely left paying for space they no longer need. With conventional space, occupiers are typically tied into 3 or 5 year term but a serviced office client can sign for just 3 months. The combination of flexible terms and the need for serviced office operators to retain their clients means that occupiers have a much stronger negotiating hand throughout the life time of the contract. With office space accounting for approx 20% of a company’s costs, this greater flexibility certainly gives serviced office users the competitive edge.
The report also suggests that occupiers feel more work is needed to create a better partnership between themselves and their landlords. Many respondents feel that their ‘voice’ is only heard when their renewals are up for negotiation and that during the rest of the tenancy their issues are left un-resolved.
Serviced office providers find themselves in a position to offer the close working relationship that many traditional occupiers crave. The intense competition within the industry in the UK (Over 1000 properties across the UK) makes it imperative that customer service levels remain constantly high throughout the duration of a clients stay – otherwise they can vote with their feet and move out.
Whilst achieved rents continue to fall across the market, traditional occupiers seem mystified that service charges are rising rapidly (often unannounced). There is a feeling that there is no real incentive for landlords to negotiate lower prices from their suppliers in order to keep service charges down.
In contrast businesses taking serviced office accommodation agree an ‘all in’ price. This includes the cost of their office, rates and service charge allowing them to budget accordingly without fear of nasty surprises. Serviced office clients also benefit from paying monthly rather than quarterly in advance.
Julie Calder, Abbey’s Managing Director comments: ‘It’s clear that there are a number of problem areas between occupiers and their landlords. I believe that the serviced office concept goes a long way towards resolving the main issues: Flexibility, responsiveness and value for money.’
Source: Abbey Business Centres
Citations:¹ The UK Occupier Satisfaction Index 2009 – http://www.occupier-satisfaction.co.uk/
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