Low interest rates are driving commercial office growth

Thursday 12 July 2018
With the Bank of England seemingly willing to lift interest rates over the past 8 years, strengthening the UK economy, the commercial office market has been thriving.  Conventional office landlords have in the majority been able to drive up rents, improve occupancies but are experiencing an emerging shift towards the flexible office market. 

 

 

Brands like WeWork, TOG and Spaces (IWG group) have made hay and are opening new centres at an unprecedented rate.  However, there is still a big question about sustainability, BREXIT and Political uncertainty over the years has also influenced this movement towards shorter leases/serviced offices/flexibility. 

 

 

Major supply across the property sectors, especially in some cities and regions has been limited, therefore brands like Bizspace and Regus have been investing heavily in refurbishing there aging portfolio and buying out struggling traditional competitors.  

 

This shift towards flexible office solutions has opened up a new channel in the form of 'owner operators' brands like LABS and LEO, who can leverage their asset portfolio in a more agile way, unlocking the trend towards shorter term contracts. 

 

At MBS Property we've seen an obvious shift in the way clients view their next office move, the need for agile working environments and flexibility are the norm.  Traditional Commercial Agents like CBRE and JLL are now presenting flexible office providers alongside conventional leases, which clearly demonstrates the change in the market.

 

The question still remains, is the market sustainable at the current rate of growth and will an interest rate rises of just 1/2 to 1% over the next year have a significant effect on this fragile, yet booming industry?  The largest alternative investment firm in the world, Blackstone doesn't appear to think so and with the possible sale of IWG and WeWorks thirst for investment the indicators are no!

 

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