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Crunch to slice a third off national office take-up

Office letting across the UK will fall by a third over the next two years as the impact of the credit crisis and economic uncertainty take their toll.

Take-up is expected to drop from 13m sq ft to 9m-10m sq ft, according to a study of 28 regional centres by Lambert Smith Hampton. Its National office report 2008 reveals that 13% of regional office space will be empty by 2010- up from 9.4% now across the country.

Manchester, Leeds, Glasgow, Birmingham and Bristol- which will account for more than half (4m sq ft) of all new space scheduled to come on stream during the period - are expected to be among the hardest hit.

However, LSH said that developers’ prudent response to the credit crunch meant that the UK was unlikely to experience the high levels of vacant space seen in the last recession.

“With many consented schemes now on hold as a result of the credit squeeze and economic uncertainty, the risk of a 1990s-style oversupply in the medium term has been somewhat mitigated,” says the report.

“We can expect the market to begin to absorb the supply as demand strengthens from 2010 onwards.”

Estates Gazette, 21-06-2008

Pacific Business Centers Announces Acquisition of American Executive Center

Palo Alto, CA – May 9, 2008 – Pacific Business Centers (PBC) the fast growing provider of on-demand offices and meeting space, announced today it is acquiring a substantial minority equity interest in American Executive Center (AEC) locations in Cupertino and Sunnyvale, California. Both locations will be re-branded as Pacific Business Centers and their operations and management structure merged into PBC’s.

“I have the highest respect for what PBC has achieved,” said Keith Warner, American Executive Center CEO. “Joining PBC will provide us with the resources and support necessary to upgrade our technology platform, enhance the value our clients receive, and extend our marketing reach.”

American Executive Center opened its first center more than 23 years ago in Cupertino and added the Sunnyvale location in 2004. The centers were owned by Keith Warner and his brother Jeff Warner, an active member of the Board of Directors of OBCAI, the international trade association of Office Business Center operators.

The transaction fits squarely into PBC’s “reverse roll-up” strategy aimed at partnering with top echelon operators who join PBC as Managing Partners. The regional Managing Partners bring their expertise and local market knowledge, while PBC provides economies of scale and funding to open new locations. Over time, the management processes and technology platforms of all centers will converge, setting the stage for a seamless integration. “Full ownership integration is also possible should PBC go public in the future” said Jeff Warner, AEC Executive Vice President, “but ultimately it’s up to the Managing Partners to control their destiny.”

Laurent Dhollande, PBC’s CEO, said, “The most exciting aspect of this announcement is our ability to expand the depth and breadth of our executive team with universally respected industry leaders like Keith and Jeff. Their energy and enthusiasm alone will turbo-charge our growth engine”.

PBC’s first experience with the Managing Partner concept is a year old, when Tracy Conway-Wilson, a long time successful owner-operator herself, joined PBC to grow the company’s portfolio in the Sacramento area. “We were doing fine on our own, but it became clear to me that I would probably not survive very long as an independent operator,” said Wilson. “One year later, I oversee two centers I co-own with PBC, and will have a third center in June. All centers are equipped with state-of-the art VoIP telephony. I have marketing and operating capabilities that were unthinkable when I owned just the one center, and, best of all, we are killing our competition.”

“Tracy’s addition to PBC has been a catalyst,” said Scott Chambers, PBC’s COO. “It is clear that economies of scale generated by a larger organization are becoming essential, but we could not fathom ourselves growing top-heavy and overhead-loaded. We are in the service business, where local presence, decentralized decision making, and entrepreneurial spirit are paramount. Tracy showed us that seemingly contradictory forces, like the need for economies of scale and aspirations for entrepreneurial freedom could be fully reconciled. Not only did she exceed everyone’s expectations, but she showed that the Managing Partner model was easy to implement because it fits our philosophy so well.”

PBC’s partner model is inspired from the organizational model present in many law firms and consulting firms where equity partners are co-owners of the company, contribute to the management of the overall infrastructure, but remain vested in the long-term success of their local portfolio because close proximity to the customer is critical to the entire organization’s success.

Avanta embarks on passage to India

Kenmore-backed serviced-office operator Avanta has signed for its first two offices in India as it launches a 1m sq ft expansion drive in the country.

The group has taken a 32,000 sq ft office in Mumbai, adjacent to the city’s stock exchange, and 21,000 sq ft at Statesman House, in the heart of Delhi’s central business district.

Avanta said around half of the space at Statesman House, which opens in August, was already under offer.

Chief executive David Alberto said he expected to complete deals on around 250,000 sq ft more office space in Delhi, Mumbai, Banagalore and Dubai by the end of 2009.

Sean Morgan, formerly operations director for rival Regus in its Asia Pacific region, has become managing director of Middle East and India at Avanta.

“India is a huge growth economy”, said Alberto. ” There is tremendous interest from international occupiers that are looking for better quality office space than the market can currently provide.”

He added: “India will be a bigger business than the UK in three years’ time. We fully expect to have 1m sq ft in the country within that time.”

Alongside its new operation in India, Avanta has agreed to form a joint venture with local developer Patel Realty- a division of Patel Engineering- to open serviced offices on several of its developments.

Avanta is also in discussions to launch a joint venture in China. It hopes to open serviced offices in Beijing and Shangai, and plans to build a Chinese portfolio of around 1m sq ft.

In the UK, Avanta manages more than 600,000 sq ft of office space in London, Manchester, Birmingham and Edinburgh.

Estates Gazette, 14.06.08

Stylished Serviced offices opening in St Pauls

Snow Hill’s new serviced office centre has just opened 20,000 sq ft of office space due to the high demand in the St Paul’s area, Central London.

The serviced office space available in this building combines modern innovative workspace and stylish atmosphere. This is far more than only just a Business Centre. It offers a large range of facilities that will help any type of businesses with changing needs. The building is unbranded to allow companies to create their own image and offers meeting rooms on a pay-as you-go basis.

“Within a month, we have already secured great interest in this building from businesses from any type of sector. Space is still available, and Search Office Space highly recommends businesses in need of office space in Central London to book a tour through us shortly.” Says Richard Smith, Managing Director of Search Office Space.

If looking for a business address in Central London, this centre also offers a variety of virtual office solutions.

 

 

CB Richard Ellis in talks to swallow Liverpool agent Irving Rice

CB Richard Ellis is in early talks to buy Liverpool property services specialist Irving Rice to continue its expansion into the UK’s regional markets.

The global company is thought to have made an initial approach to the agent about buying it, but no deal has been agreed yet.

Irving Rice was founded in 1994 by Nick Rice and Malcolm Irving, who are both well-known figures in the Merseyside market.

The company principally operates in the north-west of England and north Wales, providing a range of property services in the industrial, office, retail and leisure sectors.

It is particularly well known for its agency work, advising clients such as Mersey travel, Gladman, Muse Developments, English Partnerships and Legal & General.

CBRE is not the only company vying to buy Irving Rice. The agent has also been approached by Colliers CRE, which is looking to expand into the north-west.

If a deal does take place with CBRE, it will further cement the company’s growing reach.
It has already bought several regional firms, such as the 40-strong Birmingham and Leeds-based agent GSD.

A spokesman for CBRE said the company did not speculate on market rumor.

Irving Rice was unavailable for comment.

Property Week, 11.04.08

Colliers CRE buys West End’s Godfrey Vaughan

Colliers CRE has bought London West End agency Godfrey Vaughan for more than £8m.The purchase is for £7m in cash plus 1.6 million new Colliers CRE shares worth around £1.1m.

Colliers CRE has rapidly expanded in recent years and plans to continue snapping up UK businesses. It is also in early talks with north-west agency Sanderson Weatherall over a possible takeover.

The timing of the deal with Godfrey Vaughan is thought to be linked to the change in the Capital Gains Tax rate to 18%.

David Izett, chief executive of Colliers CRE, said: ‘In terms of timescale for getting the deal done, Capital Gains Tax did play a role it helped drive the timetable, but it didn’t drive the deal. Charles and I started talking about this in 2006 then I just decided that I’ve got to do this because I really want to do this.’

Godfrey Vaughan employs 24 staff in total, all of whom will be offered employment contracts with Colliers. In the year to 31 March 2008, based on management accounts, Godfrey Vaughan generated revenue of £4.2m. In the year to 31 March 2007, the business produced revenue of £4.1m and profits before tax and partners’ distributions of £1.8m.

Following completion, Godfrey Vaughan will be rebranded as Colliers Godfrey Vaughan.

Property Week, 11.04.08

Serviced-office outfits open new space amid financial turmoil

The growing specter of recession in the US may have caused developers and investors in the UK to abandon their expansion plans, but it has had the opposite effect on serviced office providers.

Instead, they are trawling for office space in the City of London and Canary Wharf in anticipation that the US banks and other financial services occupiers will shed jobs over the next six months and need short-term accommodation until the downturn subsides.

In April, Abbey Business Centres is due to open 28,000 sq ft of serviced offices on floor 37 of One Canada Square at Canary Wharf. This is in addition to 28,000 sq ft it has at the Swiss Re Tower at 30 St Mary Axe.

It has followed the example of MWB Business Exchange, which has opened 34,322 sq ft at 55 Old Broad Street and 18,500 sq ft at City Tower.

Regus has also confirmed it has been approached by financial services occupiers in the City that want to trim surplus office space in the months ahead.

Take advantage

For small and medium-sized firms, the growth in this sector since the credit crunch means there now is a wider choice of serviced office space to occupy than ever before.

‘There are a lot of serviced-office providers who are positioning themselves to try to take advantage of what has been happening in the US over the last few months,’ says Julie Calder, managing director of Abbey Business Centres, which now has 13 centres across the UK and 4,000 workstations.

Financial occupiers are driving this demand because they want more flexible space amid financial uncertainty.

PricewaterhouseCoopers, the accountant, says it expects to be targeting short-term office accommodation over the next year. It is moving 6,000 staff to More London in 2010 for its main operation, but says that serviced-office accommodation is rising up the agenda to accommodate its subsidiary offices.

Paul Harrington, PWC’s real estate director, says that serviced-office providers have begun to tailor their services towards traditional corporate occupiers, who until now have only ever considered long-term leases.

But since the beginning of the credit crunch in August, many of those occupiers have had to reconsider their position.

‘There is a real opportunity here for those serviced-office providers who can prove to corporate occupiers that they can provide as good accommodation as some of the smaller landlords out there,’ says Harrington.

‘They could even start to challenge some of these landlords if they play their cards right.’
Harrington says that, for the last year, PWC has been leaning towards the use of serviced offices for many of its subsidiary businesses.

‘Quite often it is better to go for a two- or three-year lease while you test the water to see whether a certain enterprise is going to work. Then, when you have built up that base, you may later look to a more long-term arrangement.’

And it is this flexibility that makes serviced offices appealing to SME’s too. Committing to conventional space can be too big a financial burden.

Eye of the storm

Peter Cookson, managing director of corporate outsourcing at Regus, says there are striking similarities between now and the internet crash in 2001.

During that period, technology companies that had taken space, particularly in Thames Valley, were hit hard. This time, it is the financial services sector that is in the eye of the storm, but Regus expects the impact to be the same.

‘In 2001, you had all these technology companies who suddenly had a lot of space on their hands that they didn’t need,’ says Cookson.

‘What we did then and what we are doing now is talking to these companies to see if we can let their space to our clients. It is fair to say we have been getting a lot of enquiries from corporate occupiers who need to scale back their space in the City.’

For SME’s looking for a prestigious address in the City, the fallout from the credit crunch means now is a good time to get hunting.

By Mark Shepard, Property Week, 14.03.08

Emerging markets help Regus to post record profits

Serviced office provider Regus is aiming to take advantage of the downturn in the financial and property markets after posting record annual profits.

In a confident statement on the back of its 2007 results, Regus said that take-up and profits had not been hit by the credit crunch, and had, in fact, improved as the year wore on.
Chief executive, Mark Dixon, said he expected the downturn in the property market to reduce rents in the UK over the next 18 months, which would enable Regus to step up expansion by signing more leases.

‘We have been cautious about growing in the UK, especially in London,’ he said. ‘We think rents in the West End especially could come down over the next 18 months and we will have the opportunity to add more stock in London.’

In 2007 Regus achieved a 54% rise in pretax profits to £120m. Revenue rose 27% to £862m. Excluding the impact of new centres, revenue growth was 7% and profit growth was 21%. This was driven by an increase in average occupancy rates from 81.8% to 82.7%. The full-year dividend was raised by two-thirds to 1p a share.

The number of available workstations rose by 24% to 133,000, as it opened a further 146 centres, and revenue per available workstation increased 2.3% to £6,487.

Emerging markets were the driver of growth, as revenue increased by 40% to £113.9m. The company opened its largest centre, in Shanghai, which has 1,400 workstations, and it is set to open in Malta and Mauritius.

‘We’ll see growth throughout the business, but weighted towards emerging markets, especially in Africa,’ said Dixon.

‘Multinational companies are increasingly operating there because of the natural resources located there, and the fact that there is now, relatively, more political stability. It’s the last true emerging market.’

Dixon claimed Regus was well placed to withstand the effects of the credit crunch: ‘Quarter four saw a steady improvement and continued increase in margins, and the second half ended better than it began, even in America’.

‘Customers don’t want to enter into fixed arrangements, and they don’t want to put down capital, so they appreciate the lower costs of flexible space,’ he added.

In the UK, Dixon said he would not be replacing chief executive Nick Wood, who left in November. Dixon took over as UK chief, but has now stepped back.

Mike Phillips, Property Week, 20.03.08

Property group may switch cities

A STOCK-MARKET quoted company is understood to be planning to relocate its head office to Liverpool. Property specialist Your Space wants to relocate from Manchester in what would be a major public relations coup for the city.

In recent years Liverpool has lost most of its companies quoted on the London markets and city leaders have been keen to see the trend reversed.

Your Space is listed on the Alternative Investment Market and is currently valued at around £20m. It specialises in renovating listed buildings and converting them into hi-tech modern serviced office accommodation. The company last year opened Il Palazzo in Water Street, a former banking hall that has been refurbished in a £1.6m investment. The building now offers a package that includes a concierge, free telephone calls and broadband and all bills met.

Director Steve Turton said: “We became operational last August and expect the 15,000 sq ft to be fully let by next month. “We have a unique business model converting buildings of character into five star commercial accommodations. The combination of acquiring this building and coming to Liverpool was too good to miss.” He said he was unable to comment on whether a relocation was imminent but added: “Liverpool is a great place to do business at the moment and this is a great flagship building.”

Your Space has eight centres across the country including London, Manchester and Glasgow. However it also has an aggressive expansion programme in the pipeline and plans to open another 30 centres over the next three years. If Il Palazzo proves successful, the company will look for a second building in the city centre to convert.

Mr. Turton added: “Serviced offices are a fast-growing market and we are in a good position to help meet those sorts of needs.”

Written by Barry Turnbull, Liverpool Daily Post

Bank of England Maintains Bank Rate at 5.25%

The Bank of England’s Committee yesterday voted to maintain the official Bank Rate to 5.25%. The committee who attended the monthly meeting, which was held yesterday, came to the conclusion that increasing food and energy prices was to be blamed for this.

Another reason for the Bank of England to come to this decision is the credit crunch crisis which started in the US when the Federal Reserve cut interest rates to 3% for the second time in nine days to prevent the US economy from going into turmoil. The Federal Reserve is hoping that this move will be of a good nature and will cushion the US economy from the worst effects of the credit crunch still to come.

After the effects of the credit crunch in the US, the toll has now spread over the Atlantic and has caused havoc in the UK and Europe too. Reports have found that consumers are spending less which is leading to a down fall in the economy leaving many businesses bankrupt or merely in a position where they cannot afford to pay their rents. The significant inflation risks and the slowing growth of the economy are at risk here. Where there has been a drop in the US market, the UK economy is just as bad with both countries facing turmoil should they not tread cautiously.

Nearly £175 billion has been lent to businesses in the commercial property market - UK; many analysts believe that the recent effects of the credit crunch will have no effect on the commercial property market and that many firms will just continue to buy new properties to add to their portfolios. While many other analysts believe that the office, retail and warehouse industry has cooled rapidly and they fear this could turn into a slump. They believe that this industry is coming to a juddering halt and that Britain is facing a commercial property crash which has not been seen since in the early 1990’s.

On the other side of the Atlantic in the US, the commercial property market is still an on going crisis in the global finance market. Economists in the US say tighter credit and the substantial reductions in new constructions is causing havoc with the unemployment sector across the state. The effects of the bailout on the commercial and real estate markets has slashed property values rapidly and as the impact of sales and income tax causes a threat in the economy, the whole nation seems to be going into recession.

Both the UK and the US have been hit severely by the credit crunch and it seems that both countries are having to pay the price for it.

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Latest Headlines

• Luxurious Executive Offices opening in Financial District, NYC
• Serviced offices are a “credit crunch safe haven”
• Trendy Serviced offices opening in Bank, EC4
• A new centre to UBC’s Portfolio
• United Business Centres expands
• Crunch to slice a third off national office take-up
• Pacific Business Centers Announces Acquisition of American Executive Center
• Work and Relax: Hot Desking is rising
• Office Space to Let available now in New Bridge Street, London EC4
• Avanta embarks on passage to India

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