Could vacancy rates impact your next office move?

Let’s face it, moving office is not a regular occurrence, with most businesses moving every 5-10 years. For many businesses approaching a lease expiry, there tends to be a natural expectation that there will be plenty of opportunities out there to quickly and easily find the next office space that is right for you.

Not so. The current dynamics of the London office market are characterised by high demand coupled with a lack of supply, and therefore a historically low level of vacant office space available. Let me first outline what we are seeing in the market and then recommend what you can do about it.

Recent reports on the London office market have highlighted that the lingering uncertainty has dampened the appetite among investors. Despite falls in the pound this year which has increased the investment case for London amongst overseas investors, stock shortages, economic and political turbulence and investor caution have all combined to hold down investment volumes. BNP Paribas has reported that central London transactions are down more than 40% on the previous H1 five-year average, with investors and owners unmotivated to transact while the “fog of Brexit” remains. 

On the other hand, demand from the occupier market has held up particularly well, supported by strong jobs growth and an unemployment rate at 3.8%, its lowest level since 1974. Typically, the occupier and investment markets are strongly aligned, however, BNP Paribas points to a divergence which has manifested in the London market over the last two quarters.

These stable levels of take-up by occupiers, coupled with sluggish delivery of new supply, has meant that London-wide vacancy rates have dipped below 5% for the first time in over two years, according to Colliers International. In addition, Colliers says a lack of new-build supply is also driving rental growth, leading to the first increase in prime rents for three years. Average rents rose 4% to £72.50 per square feet in the first half of this year; however typical incentives have remained unchanged at 24 months’ rent-free on a 10-year term.

In the City, a lack of Grade space has put upward pressure on prime rents, according to BNP Paribas, with rents rising to £69.50 per square foot in Q2 this year. Positively, for occupiers, however, the vacancy rate rose to 6.8% in Q2, providing occupiers with more choice in a supply-constrained market. In contrast, vacancy rates in the West End have continued to decline, reaching 3.6% in Q2, well below the long term quarterly average of 5.6%, with prime rents at £112.50 per square foot.

Supply in Midtown also fell in Q2, down 20% on the first quarter of this year, and significantly below the long term quarterly average. BNP Paribas calculates a vacancy rate for Midtown at 4.0%, however prime rents have remained static at £65.00 per square foot.

The situation in Southbank and Docklands creates an interesting contrast. Comparing BNP Paribas figures, supply in Southbank remains the most supply-constrained market in Central London with a vacancy rate of just 2.0%, and prime rents of £67.50 per square foot. Contrast this with the Docklands, where supply fell marginally in Q2 this year, but vacancy rates stand at 9.7%, and prime rents in Canary Wharf are £48.50 per square foot. This very much reflects our experience with clients, who are happy to pay more for the vibrant feel and good transport links in Southwark, compared to the more clinical and isolated atmosphere in the Docklands.

So what does this environment mean for businesses that are looking to move office?

Well, low vacancy rates mean you have to begin your property search much earlier if you want to find the ideal space. We now recommend that clients looking for spaces under 5,000 square feet need to start their decision-making process at least 6 months before their lease expiry. For properties between 5,000-15,000 square feet, you should begin the process up to one year ahead. And, for bigger office spaces, an 18-month time frame would be very sensible in order to provide the widest choice available.

Raymond James Project

At Cityspace, we help many clients at the early stage in finding the office that is right for them. Using our extensive property database, we’re able to very quickly provide clients with a range of choices, looking at both on and off-market opportunities. And for any opportunities identified, our Evaluation Report can help clients with their decision making by giving them a clear view of potential costs and timeframe, plus assist them in negotiating the most favourable terms on their new lease.

To find out more, please contact the Cityspace team on info@cityspacemanagement.co.uk.

Have we reached a turning point for office technology?

Over the past 20 years, we've seen an incredible change in how technology is implemented and deployed in the office environment. We now stand at a turning point where new technology is fundamentally changing the way people communicate and collaborate in the workplace, raising new considerations for office design.

Brands2Life Project

Brands2Life Project

For many of us, it doesn't seem that long ago when we were anchored to a specific desk, tied to a desktop phone and tethered to a PC. Moving away from this safe harbour meant leaving all our technology behind.

But technology has moved forward at a rapid pace and, alongside this, people have not only changed the way they use technology, but also the way they communicate and collaborate with others via technology.

Take video conferencing, for example. In the early days of VC in the nineties, companies required expensive hardware to video conference, installed in selected meeting rooms. These early systems were not the most user-friendly so, to be on the safe side, you also needed a member of IT on standby in case it didn’t work. As a result, these systems were costly, complicated and intimidating for the lay user.

In the past five years, there has been a massive change in the way video conferencing is implemented, and the way people use it within organisations. There has been a significant move away from proprietary hardware to internet-based VC solutions such as Zoom, Blue Jeans and Skype for Business. Speed and quality have taken a massive leap forward, costs have fallen, and these new systems are now much more intuitive and easier to use.    

Ensono Project

Ensono Project

Telephony has massively changed as well. Offices no longer need to set up an onsite telephone exchange system containing a limited number of phone lines available - all this has now moved to the cloud. In tandem with this, VoIP (Voice over Internet Protocol) has improved significantly from the early days of Skype, where poor sound quality, echoing calls and hit and miss reliability hampered widespread business adoption. Today, these systems are now cheap, clear and reliable to use.

In the past 18 months, we’ve been seeing more companies dispensing with the desk phone altogether and moving to mobiles, further eroding people’s ties to a certain desk. In the future, it may only be those using high graphics software such as desktop publishing or CAD who require a dedicated workstation, or those where it is a regulatory requirement to record calls such as financial traders.

The rise of smartphones, tablets and laptops has led the move from just a voice connection to the office, to become fully aligned with office software and applications to deliver truly mobile working and allowing multi user group meetings with remote workers.

So, what are the implications for communication, collaboration and office design?

Well, firstly, technology has greatly facilitated a revolutionary change in working practices and acted as a catalyst for the rise of hot-desking, Activity Based Working and more flexibility in where and when people can work through remote working.

With staff now able to use any device from any location, the way people communicate and collaborate has fundamentally shifted from the traditional meeting room environment to technology platforms. People can now gather from remote locations, collaborate on Zoom and organise workflow on platforms such as Slack or Monday.com.

This, in turn, has reduced the number of employees who need to travel in and use the office space, while at the same time increasing the numbers of those who can collaborate in the same place, at the same time, via technology. With the increasing costs of office rents, this is now driving a fundamental rethink in the role of the office as a hub, rather than just a destination for employees.

Less formal peer to peer conferencing has also increased significantly, moving away from the requirement for meeting rooms for conference calls to internet-based calls from peoples' desks or from more informal spaces. This has led to an increasing need to consider office acoustics in open-plan environments and collaboration spaces, and the subsequent need to create zones for quiet concentration.

Ensono Project

Ensono Project

Ensono Project

Ensono Project

As technology continues to move forward in leaps and bounds, a key challenge for CEOs and Finance Directors is to get the optimal configuration of office, technology, communication and collaboration that is right for them. Often the technologies themselves are difficult to understand, let alone finding the best way to apply them to an organisation.

The solution will never be a one size fits all approach and while it is true that technology has significantly changed the face of office communication and collaboration, one thing has remained the same - offices are still all about people. So, combining the right technology with the right workspaces that help people collaborate, share knowledge, and maximise their productivity and growth remains vital.

Taking the stress out of relocating

Studies have shown that moving house can be one of the most stressful events in life and, unfortunately, moving offices can also be fraught with stresses and strains. But it needn’t be this way - with the right focus and the right plan, relocating to a new office can be a smooth experience, even for the inexperienced.

The heart of the problem is that most businesses are great at doing what they do best - running a successful business - and are less knowledgeable about the process, opportunities and pitfalls in the world of commercial property. And let’s face it, moving office is not a yearly event, and with most businesses only moving every 5-10 years for many it’s a matter of having to restart from scratch all over again.

All big problems are best broken down into smaller parts, so to help you approach your next office move we’ve broken the process down into three areas for consideration....


#1 - Identifying the right area

When deciding to relocate offices, your first consideration is to identify the area that is going to be best for your business to operate from.

In some sectors, the choice of neighbourhoods can already be pretty clear. In London, if you’re a serious player in insurance, for example, it’s EC3 in the areas surrounding Lloyds of London. For the legal profession, it’s predominantly the area around Chancery Lane and Midtown. And for tech companies, the hub of King Cross and Old Street has become a natural choice.

But for many businesses, it’s not as clear cut and you have much more flexibility in the areas you can consider. So, how best to decide on the right neighbourhood? Well, we recommend approaching the decision based on three factors: the fit for your market and brand, the cost, and the attractiveness and convenience of the area for staff.

Firstly, you need to consider whether an area is the correct fit for your brand and says the right thing about you as a company. Portraying the right message via your address is important for both established companies and start-ups alike. Coupled with this, you also need to consider your proximity to customers and clients, suppliers and partners.

Secondly, there is the need to pay attention to the cost. Rents in London may have changed significantly since your last move and in terms of running your business, the cost of your office space is likely to be your biggest outlay after staffing costs. Here, a good agent with detailed market knowledge can advise you on identifying a shortlist of areas within your budget and potential offices within these plus negotiate the best lease terms. If you don’t have an agent, get in contact with us and we can recommend one for your particular circumstances.

Finally, the attractiveness and convenience of an area for staff should be a key factor when shortlisting neighbourhoods. You also need to consider changes to transport links and commuting times. For potential new staff, your address will be part of an applicant’s decision-making process, so you need an area that will be a positive factor in winning and retaining new joiners.


#2 - Finding the right office

Having identified potential areas, your agent can then provide you with potential office spaces for you to view. At any one time, there are usually plenty of options to choose from - the key thing is choosing the office that is right for you.

When evaluating potential new premises, you need to assess whether the space suits your company’s organisational structure and working style, has the flexibility for the future, and allows for any envisaged expansion. Crucially, you should also consider the financial aspects of the building in order to gauge any potential long-term costs and to avoid any unpleasant (and costly) surprises further down the track.

At Cityspace, we provide extensive support to clients in the early stages of selecting a new building through our Evaluation Report, which helps you gauge the suitability of a potential new site via a full building appraisal and feasibility plan.

As part of our Evaluation Report, we provide a space plan test fit where we confirm that the office space is the right size and configuration for your needs, in addition to providing a maximum density plan to indicate the future growth potential of the space.

We couple this with a cost plan, outlining both the minimum cost of your new office and a list of interior design options for your board or steering group to consider at the outset. As part of this, we provide a detailed report on any issues or defects associated with the building or infrastructure, including mechanical, electrical, or health and safety systems.

Additionally, we indicate costs for any rectification works that may be required for the space. These costs can be used by your agent in negotiations with the landlords on capital contributions or to have the defects rectified. It is worth noting that in the 30 years we have been offering this service, we have always found defects of greater value than the cost of our Evaluation Report. 


 #3 - Assessing whether to stay put

The Ensono Project

The Ensono Project

The Picsolve Project

The Picsolve Project

Before you commit to the major expense of relocation, it may be worthwhile reviewing how your existing office space is being used and whether it can accommodate more people.

The best way to successfully increase headcount in an office is not by looking for specific gaps in your existing space where you could fit additional people in, but by thinking about the whole office space and how this could be used more effectively.

The key to success is, therefore, to think about your office holistically, and make sure that the practical way you’re using the space is keeping pace with your growing headcount. If you need to increase your headcount, the team at Cityspace is here to help - just provide us with your existing office floor plan, and we’re happy to meet and come up with the most practical and cost-efficient solutions.

If you want further information on taking the stress out of relocating, please feel free to contact us.

Creating Spaces Without Walls

New design solutions for the modern office

One of the significant challenges in office design is to create the right balance between aesthetics and the need for a highly practical and functional workspace.

In every office, there’s a prerequisite to create different zones – desk areas, breakout zones, formal meeting rooms, public reception spaces - and the traditional way to do this has been through the use of walls and partitions to divide up and compartmentalise different areas.

However, recent developments by flooring manufacturers have now opened up new opportunities - to create spaces without walls, by using carpet and flooring colours, finishes and textures that seamlessly transition between the different areas of an office. It’s new, it’s exciting, and it may be the perfect solution to make the best use of your office space.

Standardisation has fostered innovation

Traditionally, flooring manufacturers viewed carpet and vinyl as apples and pears; two different surfaces, with two different uses, always separated by an abrupt trim. Recently manufacturers have wised up - why not create the option of having both carpet and vinyl surfaces in a standard 500 x 500mm tile.

Sounds pretty simple, but for office designers, it’s quite revolutionary, and opens up the opportunity to design spaces without the need for partitioned walls, in a way that wasn’t possible before.

And here’s the even better news - because all flooring surfaces can now coalesce around a standardised tile, your designer can create innovative combinations of colour, finish and texture at standard prices. In other words, you can get an imaginative and practical floor design, without additional costs to your flooring budget.    

How it works

The design concept of creating spaces without walls is to combine different flooring finishes and textures that transition seamlessly from one office area to the next. Workstation areas can be separately zoned, with walkways and thoroughfares demarcated.

HCP_project.png
HCPproject.png

For the transition to more formal meeting areas, colour and texture can be used to create a different feel for the zone and, within meeting rooms, different colour tiles can be combined to create a distinct feeling from the rest of the office.

HCP-office.jpg
HCP-2.jpg

When partitioning is being used for more private areas, these zones can be accentuated by floor colour. For hallways and office walls, a colour mixture can be used to make them feel more extensive and luxurious.

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HCP Project

If you would like to find out more about how creating spaces without walls could work in your office, please contact the Cityspace team on info@cityspacemanagement.co.uk.

Your three most important office decisions for 2019

It’s the beginning of the year, and a time to think ahead on the office decisions you may need to make in 2019. To help you better plan how to make your office an efficient, happy and productive environment, we’ve compiled a list of the three most essential office decisions management teams should be thinking about in the coming year.

#1 Can I fit more people into my existing office space?

The short answer is yes. You can always squeeze more people in, subject of course to any restrictions on occupational density imposed by your fire officer or landlord, or limitations on building infrastructure. However, if you want to increase your headcount without your staff starting to feel like sardines, you need to do it in the right way.

The best way to successfully increase headcount in an office is not by looking for specific gaps in your existing space where you could fit additional people in, but by thinking about the whole office space and how to use it more effectively.

This involves considering the way individuals and teams work and collaborate, or by making more intelligent use of meeting areas. For example, formal meeting rooms which are used infrequently take up a lot of floor area, space that could be used much more effectively by moving to smaller, informal meeting sites, and freeing up space for extra desks.

Photo by  rawpixel  on  Unsplash

Photo by rawpixel on Unsplash

The key to success is, therefore, to think about your office holistically, and make sure that the practical way you’re using the space is keeping pace with your growing headcount. If you need to increase your headcount, the team at Cityspace is here to help. All we need is your existing office floor plan, and we’re happy to meet and come up with the most practical and cost-efficient solutions for your particular circumstances.

#2 Can I change my office layout?

At the heart of every successful office is a productive workforce, in a motivational environment, designed in a way that fits the culture of the company. So a critical factor in driving this success is an office layout that brings the best out of your teams and makes the most efficient use of your office space.

The best way to increase productivity is to look at both the layout and the way that people work. For design planning, it’s looking at things like the suitability of the workstation environment, whether this workstation layout is conducive to collaboration with others, and whether both formal and informal meeting spaces are laid out and utilised most efficiently.

Regarding the way people work, more and more of our clients have been looking to increase the flexibility and productivity of their workplace through Activity Based Working (ABW). This approach explores office design in line with work culture and practices and suggests ways to improve your workspace to increase efficiency and staff wellbeing.

#3 Should I consider a new office space?

For any businesses approaching a lease expiry in 2019, a fundamental decision is whether to stay put and remodel or consider a new office space elsewhere. Before you commit to the significant expense of relocation, it may be worthwhile reviewing how your existing office space is being used.

Photo by  Fred Mouniguet  on  Unsplash

It’s worth remembering that most businesses will have occupied their current space for 5 or 10 years. While the original office design may have been perfect when you first moved in, there have been considerable advances in technology - such as smartphones, follow me printing and cloud-based file storage - all of which have impacted the way that people now work. This, in turn, creates an opportunity to rethink how you could re-use your existing space more effectively.

To help you make the right decision on how best to remodel your existing space, we can provide you with three occupational scenarios:

  1. A short-term plan offering a simple layout with minimum changes and expenditure;

  2. A maximum efficiency plan that uses space more efficiently without changing working practices and culture, and;

  3. A blue-sky thinking solution of how you could work in your current space, applying the latest thinking in office design and without any budget constraints.

If you’ve decided to move, it’s essential when evaluating potential new premises to assess whether the space suits your company’s organisational structure and working style, has flexibility for the future, and allows for any envisaged expansion. Crucially, it would be best if you also took into account the financial aspects of the building, to gauge any long-term costs associated with premises under consideration, to avoid any unpleasant (and costly) surprises down the track.

At Cityspace, we’re getting an increasing number of inquiries from clients asking us to research potential sites and costs. Using our database of over 10,000 property records, we can identify upstream opportunities of people who may be moving but have not yet told their landlord or agent. In addition to these off-market opportunities, we also have close relationships with property surveyors, who can provide details of current properties available for let or sale. To find out more, please get in touch with the Cityspace team at info@cityspacemanagement.co.uk.