UK property market stifles corporate growth

Citation

(2000), "UK property market stifles corporate growth", Facilities, Vol. 18 No. 13/14. https://doi.org/10.1108/f.2000.06918mab.001

UK property market stifles corporate growth

UK property market stifles corporate growth

Keywords Property, Costs, Office space

The UK property industry is failing to keep up with the accelerating pace of change in business. A ground-breaking survey, published recently by MWB BusinessExchange, the leading UK serviced office provider, reveals that over 80 per cent of businesses feel that the UK property market fails to meet their needs and 50 per cent of corporates believe that the UK office market actually inhibits corporate growth.

The Changing Face of Space report, undertaken by the University of Reading, reveals that the current UK lease structure is substantially out of touch with occupiers' requirements. A total of 60 per cent of companies stated that they would rather not hold any lease of more than ten years, with 30 per cent stating that even a five-year lease is too long. Short-term leases would ideally make up 40 per cent of a company's property portfolio, compared with the actual figure of just 20 per cent.

A new way of thinking about office space is emerging, with occupiers wanting more actively managed properties while they focus on their core business. Property companies and landlords need to wake up to these changes and view themselves as suppliers to customers rather than just rent collectors.

Other major highlights of the research include:

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  Businesses do not know their property costs. Over 30 per cent of respondents do not have the data to undertake a detailed analysis of their property costs and at least 25 per cent of corporates were unable to assess the full cost per person, or workstation, for a significant proportion of their office portfolio.

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  A total of 75 per cent of respondents can no longer justify holding surplus space. However, between 40 per cent and 50 per cent claim they would be unable to forecast the number of office staff, or the number of workstations required in a building, for more than one year ahead. Consequently, businesses need the option to acquire more or reduce the amount of space they hold in a property at short notice.

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  Three-quarters of businesses do not find landlords sympathetic towards the need for shorter leases or break clauses. A total of 50 per cent of companies believe that the ability to vacate a property is crucial when choosing new office space and just over one-third of respondents said the type of property they considered had changed over the last three years – the increasing importance of flexibility being the key factor.

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  A total of 50 per cent of companies have less than six months to find a new office property. Organisations now have to react to shorter product and business cycles and consequently are forced to reduce forecast horizons. At present, however, long lead times and inflexibility on the supply side and a lack of available property options means that it is virtually impossible to meet the occupiers' needs.

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  Occupiers want more services to support the running of an efficient office, while they focus on their core business. Companies believe that the workplace should not only comprise the property itself but also infrastructure, e.g. IT, telecoms and furniture, facilities management services and office support.

Philip Newborough, joint managing director of MWB Business Exchange, commented:

The traditional UK office market is becoming increasingly inappropriate for the fast changing needs of today's corporate occupiers. It is now considered inappropriate by most companies to hold all, if indeed any, of their property portfolio, in long and inflexible leases. Businesses want to concentrate on running their business not their office.

We are confident that the increasing attraction of total property outsourcing will undoubtedly give companies the office space alternative they really need. The challenge for corporate occupiers will be to grasp these new and exciting opportunities, to ensure that property adds value to their business, rather than serving as an often inefficient and inflexible burden.

The report is based on research carried out by Virginia Gibson, of the University of Reading, in association with Andrew Proctor and Bill Fennell, of Actium Consult and Christopher Headley, of OPD. The Changing Face of Space is the groundbreaking report based on the project's findings.

Copies of the report are publicly available for £49.95 and can be obtained from MWB BusinessExchange Ltd. Tel. 44 (0)870 844 0100; www.mwbex.com

The original research document entitled Evaluating Office Space Needs and Choices is available on the University of Reading Web site: www.reading.ac.uk/LM

MWB BusinessExchange

MWB BusinessExchange has 29 offices located throughout the UK – in London, including Trafalgar square, Cannon Street, Victoria, Oxford Street and Holborn; and at major commercial locations including Nottingham, Heathrow, Birmingham, Oxford, Manchester, Milton Keynes, Sheffield, Guildford, Leeds and Edinburgh. It has also recently expanded into Europe with its acquisition of a site in Amsterdam and two landmark sites in Paris.