Every office agency seems to have released figures recently that point towards increased occupier uptake and rising rent levels.
The message coming from the sector is unequivocal: it is a building owner’s market. Is this really the case though, or are occupiers starting to call
The answer is that it is probably a bit of both. Yes, regional office take-up is increasing steadily, rents in prime areas of London are setting new records and permitted development rights have led to a reduction in secondhand stock to fuel competition for space. Yet, while all of this points to the balance of control firmly being on the side of the building owners, there is a growing feeling that they are having to do more to meet changing occupier needs.
The serviced office sector is increasingly in the spotlight for being able to provide a range of models for owners of secondhand office stock that generates cash for owners and provides flexibility for small businesses.
Not every model is going to be right for every building owner or asset - the important thing is that they are being given options. But it is not just flexibility that occupiers are calling for, and getting. Building owners need to provide the ability to cope with the latest technologies, they need to offer the fastest broadband speeds and they need to demonstrate an ability to grow with an occupier to keep them in the long term.
Just last week, a study of the technology start-up sector found businesses were starting to move away from London hubs because of poor broadband speeds, high rents and a lack of suitable office space.
London is ranked 26th in the global table of broadband speed - this is a major competitive disadvantage. This is not just going to be a stance held exclusively by the tech world. Private-sector employment in the UK has been increasing, meaning a greater need for desk spaces, but the majority of this comes from start-ups and SMEs, meaning it isn’t a case of squeezing an extra couple of desks into a big floor plate.
The majority of building owners are not sitting there with endless amounts of grade-A office space that the big corporates are clambering over each other to occupy. Instead they have assets that are under-occupied and overlooked by the big corporates.
At the moment, they are on the back foot and unless they make the changes needed to give occupiers what they want, they will stay that way. If they want to be able to control the demand on their assets and ensure they are attracting enough interest to be in charge of their own destiny, then they need to start by looking at what is wrong with their offering, not what is wrong with the market.
The word “coalition” is trending, but maybe, politics aside, it is this collaborative approach that we need to see in the office sector, with less talk about whose market it is and who controls whom, and more focus on two parties coming up with a solution that will work for building owners and occupiers. Without that, we could have a hung sector.
Steve Jude is chief executive of Citibase