Easy way into conventional leasing
Copyright: David Lawson- first published Property Week March 2007
Managed space is finally respectable. It must be if some of the biggest names in agency are now offering advice. Not directly, of course: information is usually provided by specialists and run as an online service. But at least enquiries are no longer dismissed out of hand. The change of heart was inevitable as more potential tenants asked for alternatives to conventional leases. Landlords also began seeking advice after noting the growth of management agreements using surplus space.
The cosy partnership could soon be tested, however, as a leading managed space agent seeks to encroach into conventional leasing. Easy Offices has launched a ‘full spectrum’ service, where potential tenants can choose any kind of tenure. Founder and managing director Jon Abrahams does not see it as a challenge to established authority but more a tighter partnership between old and new worlds.
His firm already takes ‘hard to let’ space from agents and offers the alternative of running as serviced space. He sees a natural progression into adopting ‘hard to service’ small tenants. They may be looking for conventional leases but often don’t produce returns to justify the time. Agents once rejected queries for serviced offices out of hand. If they could accept a system for passing these on to managed specialists, Abrahams sees little reason why they should not divert similar calls for conventional space.
He sees huge advantages for smaller agents. ‘You may have a town tied up,’ he says. ‘You know all the space available and all the likely local tenants. Why bother to hand over business? But what about outsiders?’ Easy Offices is strongly rooted in the Thames Valley and London but, like most managed space agents, casts its nets far wider. As an online service, it deals with more than 1,000 companies in over 60 countries.
With increasing globalisation of markets, there is every chance that some small firm from California or Caracas could be looking for a foothold in the UK. Would a local agent in Hammersmith or Slough be able to pick up that query? One stumbling block rears up, however. Who collects the fees? Agents will never willingly let go of income and are bound to feel this is an insidious method of moving into their closely-guarded territory.
Abrahams admits this has yet to be solved, but old and new have managed to come to terms over sharing commission on serviced space, so the problem is not intractable. If the idea takes off, it would be one step closer to healing a huge flaw in the way property is handled in the UK. Managed space is still treated as an aberration by agents: a final solution for left-over space.
Abrahams says this jars with the way occupiers think. They often have no inbuilt prejudice towards a certain type of tenure. They just want somewhere to work. Different solutions arise at various times, and each can have benefits or disadvantages.
Freeholds, leases or short-term space can be suitable or not according to circumstances, and potential tenants should be advised and guided to the most suitable rather than funnelled into one that suites the agent. That means offering the widest spectrum of types, he says. Conventional agents now accept the option to pass on service managed space options: so should managed space agents have conventional leasing in their range of offers.
A business could start in a bedroom, graduate to serviced space then grow into bigger areas within the same business centre. But Abrahams point out that the next step to more conventional leases is usually beyond most operators and online agents. There are also smaller firms which never want serviced space, offering a variety of reasons such as ‘having their own furniture’ or ‘not wanting to be categorised as a growing firm’, he says. Again, this new generation of agents loses out on an area of business. Yet conventional ones do not benefit because they often can’t justify the time and expense to deal with tiddlers.
Adjusting to the way tenants think is not new for Abrahams. For instance, Easy Offices has always quoted costs per square foot rather than by desk but it is the only way to give an accurate picture, he says. How else can you tell the difference between a room with two desks and the same room with five? Operators sometimes object, because the figures make space seem expensive compared with conventional rents. But this is eased by quoting costs by the month. ‘It is illogical, anyway, to quote annual costs as tenants are often taking space for a few months,’ he says.
Set up 1999 – one of the first service office agencies
Early innovator – first online service after seeing most dotcoms worked online
Survived dotcom crash to become one of UK’s leading advisors
Handles more than 1,000 companies in 60 countries and 3,500 locations
Turnover doubled last year and is expected to re-double in 2007