Let’s be honest, the markets have had a pretty rough ride the past few years – With everything going on in the world right now, this turbulence will likely continue throughout the year, which will almost certainly impact the commercial property market.
Businesses across the UK will be concerned about outgoings and looking for ways in which they can reduce their capital expenditure, so understandably the costs associated with offices are coming into question.
But with (economic) uncertainty comes opportunity! The commercial property market right now is an occupier’s dream, provided you know what you’re after.
In the early stages of 2023, we expect to see landlords more motivated to offload stock to guarantee income, especially if they are seeing high vacancies in their buildings or portfolios. This will likely be seen through cheaper promotional rates and the opportunity for fitted spaces on flexible terms in order to compete with the increased demand for offices in the serviced market.
WE’RE LOOKING TO MOVE OFFICE – SHOULD WE START NOW?
The start of the year is a great time to begin the process as businesses review headcount, growth rates and finances. Once confirmed, and you know what you’re working with, we’d recommend developing your brief immediately. Nailing the brief is of the utmost importance when planning an office move.
If the brief is solid and well timed, you can slowly start collecting suitable buildings over time, invariably making the process much smoother. This longer-term view will allow you to monitor the prices and gauge which direction they’re moving in, which in turn will lead to you achieving the best rates possible.
At the start of each year, landlords with high levels of availability will offer exceptional levels of tenant incentives to ensure occupancy of their buildings increases. It’s no longer just about rents (whilst they’re obviously important); there are now multiple other considerations to help you get the most out of your office spend. Keep your eyes peeled, or have a chat with one of our team to better understand tenant incentives.
Alternatively, those wanting to move quickly may gravitate towards serviced offices, which offer high-spec fit outs, flexibility and shorter term commitments.
SHOULD WE START OUR OFFICE MOVE LATER WHEN THE MARKET SETTLES DOWN?
There’s no guarantee that the market will settle any time soon. If the predicted recession gets as bad as the news constantly reminds us, then it’s inevitable that businesses will tighten their belts; hiring freezes or redundancies, downsizing or businesses looking to exit their office buildings will mean more office space coming to the market. High levels of supply and decreasing demand usually triggers a price correction.
We will likely see fluctuation and different trends emerging, but there’s a misconception that supply is outweighing demand and there’s masses of space sitting empty, particularly in high-demand areas such as Soho, Fitzrovia, Waterloo and London Bridge. This is true for the lower quality office spaces or second hand fitted spaces as they are sometimes referred to in the market.
But it’s important to note that the ‘best in class’ buildings in the prime office locations in London, which offer roof terraces/gardens, abundance of natural light, gym and facilities to match and so on, will always receive high levels of interest no matter the economic landscape. High quality products always sell and the recession proof businesses will continue to snap up these buildings.
We monitor the market on a daily basis and have our fingers on the pulse at all times. Starting your office move late will not only lead to a rushed process but also most definitely a poorer deal. It will limit your time to search, negotiate, and go through a proper fit-out and tender process if you take on a blank canvas space. This will almost certainly result in more money being spent, with fewer options and less availability in the market.
By starting early and nailing down your brief, you’ll give yourself plenty of time to explore all space solutions. This will ensure you get the best possible deal on the office space you actually want, taking action when the time is right, and taking the state of the economy into consideration.
MITIGATING THE RECESSION RISK – WHAT ARE MY OPTIONS?
If your budget is not yet confirmed, make sure you get started on your brief so you’re ready to go once signed off and on the hunt for options. Postponing the move itself is super easy as we control the entire process. Before committing to any office, we liaise with the key stakeholder to ensure that signing on any new space is a good business decision – We call this risk assessment.
We also want to ensure flexibility is established within the contract. What does that actually mean? Well an example of this would be that we lock in exit options into your contract. This means that periodically in your contract there will be an option to terminate in the event that the economy tanks.
Finally, avoid large capex on fitting out offices. Unless you really need to or there is a substantial pot of money available to fully fit out an office, we advise focussing on office spaces that are fully fitted and require minimal costly alterations. This keeps the money in your bank account, instead of spending large sums of material costs, furniture and labour that you will ultimately write off.
OUR TOP TIPS
- Review your lease/licence today to fully understand your contract. It is imperative to be crystal clear about any break or lease expiry dates, plus any costs associated with exiting the space.
- Start the process at least 9-12 months before your contract expiry. Even if you decide to do nothing and you end up staying at your current office, 9-12 months allows for an extensive ‘stay versus leave’ analysis and full exploration of the options available in the market.
- Invest time with us looking at a range of office spaces. We will test all aspects of your brief and there is no better way of defining your needs than physically walking around office buildings. This is the same as buying a house – people will generally not purchase the first house they view, instead they go through a process of elimination.
Making Moves’ Director of Agency, Anthony Murphy, notes the importance of a clearly defined brief when moving office:
“Every great office search starts with a brainstorming session to fully develop your brief. Our team has a long list of detailed questions to tease out what is important to you when it comes to an office space so that we can accurately define your wishlist. This approach saves weeks, sometimes months of wasted time, allowing you to focus more time on your day job.”
Get in touch with us to discuss how we can help you.
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