Back in the 1970s, one of the UK’s first credit cards – Access – launched into the market with the claim that it was your ‘flexible friend’. There was no need to pay today; no need to use cash; it was a payment method that suited your needs.
Many London landlords are now also projecting themselves as a ‘flexible friend’ to office occupiers. The demand for short leases and flexible space, particularly in the wake of the wave of political and economic uncertainty, engendered by the EU referendum, has never been higher. And thanks to the wave of serviced office occupiers who have entered the market, the supply of such space is also reaching unprecedented levels.
Central London is now home to close to 8m sq ft of serviced office space – a rise of 73% in eight years.
‘Traditional’ landlords are having to look to their laurels and see how they can replicate the same kind of offer. All of which is having a profound effect on the characteristics of the leases on which office space is let to occupiers.
Those businesses who are taking conventional leases are increasingly asking for get-out clauses that can enable them to break the lease after an agreed period. The average period before the first break clause is now at a record low of just over three years.
However, we’re not quite yet in a hotel-style market where you rent by the day. The average lease length across London is still more than six years. That figure has been steadily falling over the past few years and is likely to go down further.
Somewhat ironically, office take-up figures in the capital are being bolstered by the serviced office operators who sign up for substantial chunks of space on relatively long-term leases and then let out smaller suites to their customers for very much shorter periods. The established landlords in the sector have to respond to this – especially as they are technically missing out on the ‘profit rent’ being achieved by their own serviced office tenants. Accordingly, we are seeing much more willingness to engage with the individual needs of office occupiers.
If you’re a business looking for office space in London today, you’ll have no shortage of new – and flexible – friends.