Demand for flexible work space in Leeds city centre is outstripping supply, according to new data from Cushman & Wakefield.
Many serviced office operators are now reaching over 80% occupancy levels and a lack of new buildings or comprehensively refurbished grade A stock is restricting growth.
The serviced office sector currently accounts for 4.07% of office stock in Leeds city centre, approximately 484,481 sq ft.
Leeds city centre has seen numerous local and national serviced office operators open varying forms of serviced office accommodation across the city centre over the past 15 years.
Harry Finney of Cushman & Wakefield’s Office agency team commented: “Serviced office occupiers are typically attracted to grade-A stock, however, there is a lack of grade-A stock being delivered this year which is likely to hamper future growth.
He continued: “We are aware of approximately 336,337 sq ft of new build or comprehensively refurbished office stock currently under construction, the majority of which is now committed to. Of this figure, approximately 22% is likely to be operated as a form of serviced office.”
The success of the serviced office market has been due to its ability to adapt to the needs of occupiers, something that the traditional leasing market has been unable to do.
Finney said: “We expect serviced office operators to continue to explore opportunities to add value to their service. In recent years we have seen the hotel service style approach adopted enabling high end operators to justify their premium prices.
“New schemes being launched in city this year include, the former Alea Casino at Leeds Dock which is currently undergoing a comprehensive refurbishment to provide flexible accommodation, whilst we understand the ground floor of 1 City Square will also be let to a serviced office operator.
“We believe landlords will be increasingly likely to favour serviced office providers to occupy the lower floors of a building and therefore anticipate landlords will be willing to offer increased incentives (by way of rent free or capital expenditure) to secure the high-end operators.”
Cushman & Wakefield expects the flexible office market to continue to expand rapidly in 2020.
Finney added: “Whilst we anticipate larger (2,500 sq ft +) requirements in Leeds to continue to favour traditional leased accommodation over serviced, predominantly due to cost, smaller requirements will continue to favour serviced office accommodation due to the flexible nature of the arrangement, allowing a business to react internal pressures and consequently expand or scale down. Furthermore, we expect the quality of the service offered to continue to attract and retain occupiers.”