This report will explore the following key issues regarding the serviced office industry in the UK:

• What are the key factors creating demand for serviced office accommodation?

• How have changing economic conditions affected the market?

• Which factors are driving the move towards wider and more flexible serviced offices provision?

• How are changing labour market trends impacting the serviced office sector?

• What does the future of the UK’s serviced office sector look like?

Serviced offices are commercial buildings providing short-term contract accommodation, including reception services, furniture, telephony and information technology infrastructure.

MBD’s market definition includes serviced offices, semi-serviced offices, business centres and managed workspace.

For the purposes of compiling the market size, third place locations (work spaces for drop-in customers rather than dedicated office space) and co-working spaces (work spaces, usually pay-as-you-go, dedicated as a shared working environment) are excluded. However, these types of accommodation are considered when analysing market trends, commercial opportunities, and operators’ performance.

Serviced offices are fully fitted and furnished. The operator is not only responsible for the building maintenance, but will also provide a range of business services, which may include meeting and conference facilities, as well as support services – from catering to presentation equipment, reception, secretarial and clerical services, IT and telecommunications support, video conferencing and internet access. This enables clients to occupy the premises and outsource costly internal operations.

All of the values quoted in this report are at current prices unless otherwise specified.

The term billion refers to 1,000 million.

Some numbers in tables do not add exactly due to rounding.

Crown copyright material is reproduced with the permission of the Controller of HMSO and the Queen’s Printer for Scotland.

Reports are researched and written by MBD’s in-house, specialist business-to-business consultants. Research is based on both an analysis of official information and on original, trade research, providing both a quantitative and qualitative view of the market. MBD’s unique range of frequently updated reports provide an integrated body of ongoing research, enabling deep understanding of the prevailing trends and of the drivers of these trends based on trade opinion.

The following abbreviations appear in this report:

Serviced offices are an alternative to leasing, renting or buying commercial property to locate a business. The market for serviced offices and business centres expanded through the economic downturn and is in a strong position to grow further as businesses look to accommodate their workforces with more flexibility.

The majority of serviced offices are located in city locations, where businesses are located and workforce demand is prevalent. However, serviced office providers also continue to offer centres in non traditional ‘third places’, such as airports, train stations and hotels.

Serviced offices are most appropriate for companies seeking a flexible workspace arrangement, although these can come at a premium. This is partly to cover the costs of personnel and the prime locations that many offices occupy.

A large range of organisations, small and large, use serviced offices and business centres, from legal, financial and accounting companies in professional services, to technology businesses. Large firms will use serviced office space when they require extra capacity to carry out short-term project work.

At the other end of the scale, start-ups and smaller firms find serviced office space convenient as it can be difficult to forecast staffing levels and demand for space over a period of one to two years. The flexibility of being able to add additional workstations is therefore attractive to companies that are growing quickly.

The emergence of co-working spaces and third place locations, such as major travel hubs, has expanded the range of customers using serviced offices. Providers are looking to attract freelancers, students and self-employed individuals in the hope they can develop loyalty from these customers.

The serviced offices market is dominated by one major supplier, Regus, which has significant scale advantage. However, there are a number of other nationwide providers, including companies such as Citibase and Bizspace.

Some operators focus on the London market, operating serviced office or business centre sites solely or mainly in the capital. Examples of this approach include suppliers such as Landmark and Executive Offices Group. The latter company also offers additional international locations through partnerships with other global operators.

Suppliers charge customers for almost all the costs they would normally expect to pay on top of rent in a traditional office. Rent is believed to account for approximately 40% of the total cost of office space. Providers generally charge no additional costs for business rates, furnishings, lighting and power, security, cleaning or building maintenance as these are all factored into the total cost.

Although serviced office rates are higher than leasing comparable quality location over a long-term period, providers are able to generate greater returns by providing flexibility. Some serviced office providers rent spaces for as short a period as just one day, while co-working and third place work spaces can be used on an hourly basis.

For more conventional serviced offices, the minimum occupancy period is three months, although more often licenses tend to be for nine months to a year. This is substantially less than the leases of up to 15 to 20 years associated with a traditional office.