Contents

This note reviews DTZ’s series of Flexible Office Market (FMO) research reports that were published between November 2004 and September 2006. It then goes on to consider the implications of recent investments in flexible office space.

DTZ’s FMO Research

The FMO series of reports, culminated in the fourth Flexible Managed Office (FMO) report, published in September 20061. That report claims that the serviced office sector has almost doubled in size between 2000 and 2006 and that the larger companies are in the process of swallowing up smaller fry and this has been supported by a number of major organisations including the British Property Federation, the British Council for Offices and the Business Centre Association.

Collectively these reports are the most important independent research on this sector since the papers published more than five years ago by Reading University2. In saying this, we are excluding our own research3, not out of false modesty, but as advisers to investors in business centre buildings, we might be thought not to be truly independent.

Stage 1

The Stage 1 report, published in November 2004, set out the definitions used in the reports. This is important as there had been much discussion and little agreement about the precise meaning of the phrases, ‘business centres’, ‘serviced offices’ and ‘managed offices’. DTZ’s definition has three limbs:

• The provision of short term flexible office space
• Supported by a range of business services, and
• Actively managed by on-site staff.

The importance of this definition is that it defined the industry by reference to the services provided and the flexibility of its arrangements, not by the location, length of the term or by the nature of the rental contract. It also makes the point that the success of the industry depends upon continuous innovation and improvements in service delivery.

Any research has ultimately to be judged by its accuracy and usefulness so it is interesting to look at the predictions DTZ made when writing the Stage 1 report in November 2004. It forecast a rise in demand caused by a resumption of investment in IT; a trend towards flexible overheads and shorter business cycles.

DTZ estimated that this demand would push up the total amount of FMO space from 900,000 sq m to 1,030,000 sq m, representing approximately 0.8% of total UK office space. In terms of workstations, DTZ estimated that the number in central London had risen from 26,000 to 45,000 between 2000 and 2004.

The report also quoted with approval the Chartered Institute of Purchasing and Supply studies which concluded that for many smaller space requirements, flexible space was materially cheaper on a life-cycle, or total occupancy cost basis than conventional space.

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Read the rest of the report online

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