Picture the scene. Occupancy rates in our buildings have been at an all-time high, with waiting lists for a number of our serviced office locations growing rapidly – an encouraging picture, as we continue our hunt for the next addition to our portfolio of buildings.
In fact, earlier this year we launched a report, carried out by a group of independent experts, which predicted that the growth of the serviced office sector, which to date has been remarkable, expanding by 31 per cent since 2008, will continue to accelerate, potentially growing fivefold by 2025. The report also opened the dialogue on the way that serviced offices are seen and valued in the commercial real estate sector, offering a dedicated economic framework for the industry to accurately value serviced offices.
Elsewhere, I think the serviced office sector more widely will continue to thrive and has reasons to be optimistic in the wake of June’s vote for Britain to leave the European Union. Despite market volatility and initial concerns around the state of the UK commercial real estate market post the referendum vote, it is in times of economic uncertainty that businesses need the ability and flexibility to adapt quickly – to expand or moderate growth at short notice.
This is good news for the serviced office sector, which is ideally placed to provide businesses with flexible office arrangements. In addition, we should be optimistic about the demand for flexible office space going forward even if companies decide to scale down their workforce. It is usually senior management that is the first to depart, who typically set up businesses, which all need flexible office space.
In light of this rather encouraging backdrop for our business, I’ve decided that the time is right to launch a new initiative and to capitalise on the accelerating strength of the serviced office market. Over the past few months, I have embarked upon the early stages of launching an income fund, dedicated to serviced offices – an investment vehicle that would be the first of its kind and would aim to deliver strong and steady returns to investors, even in an economic downturn.
I have spent this month sounding out investors – it’s the exciting first few steps of beginning to turn this idea into a reality.
As with any challenge of securing funding or investment, I’ve taken the time to build a strong investment case – putting forward the fund’s predicted returns, outlining our experience in creating profitable serviced offices that can withstand periods of uncertainty, highlighting Office Space in Town’s own growth over the last few years, offering credible predictions, as well as ambitions, for where we would like to be in the coming years.
I’ve made the case that serviced offices have emerged as an asset class in their own right, distinct from conventional commercial offices and delivering superior and more consistent returns, indeed I believe the fund would deliver income returns in excess of six per cent, compared to the four per cent investors might expect from conventional offices.
We have already seen the appetite from global institutional investors for investment into the UK serviced office sector increase exponentially over recent years and I have now started to approach a variety of institutional asset owners, from pension funds, family offices and sovereign wealth funds to gauge appetite for such a fund.
With Office Space in Town, the cornerstone investor, the fund would pool our four London freehold buildings in Waterloo, New Broad Street, St Pauls and Monument at a value of £160m with ambitions for investments in the fund to reach half a billion pounds over the coming years.
The outlook for the serviced office market in the UK is very encouraging and the sector looks set to grow and mature. I am incredibly excited to take these next steps into new waters and to launch a dedicated serviced office for income fund – I hope, as my conversations with potential investors continue, that they will share my optimism for the serviced office sector, my excitement for the years ahead and my confidence in this new endeavour.
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