Monday 13 June 2016 12:01 am

Kitted-out office sector to be worth £126bn within 10 years

The UK market for fully-kitted out offices could rise in value to a whopping £126bn in under 10 years, a new report has revealed.

Currently valued at around £16bn, the so-called serviced office sector is projected to increase in value significantly by 2025, to £62bn on conservative projections and £126bn on more optimistic forecasts.

Economic consultancy Capital Economics and two property academics who are behind the report put the expected expansion down to increasing numbers of growth businesses; expansion of key sectors that use serviced offices the most, and the trend towards more flexible working.

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The sector, which makes office space available for rent at short notice, has grown by 31 per cent since 2008.

“The serviced office sector has the scale and prospects to be considered as a property class in its own right, but without a definitive guide on their valuation, the strength of the market risks being overlooked,” said Michael White, one of the report authors and professor of real estate economics.

“With the pace of serviced offices’ expansion set to increase over the next decade, it is a critical time to open the debate on the way serviced offices are seen within the commercial real estate sector, including how they are valued.”

The report revealed that a lack of dedicated economic model for the industry is thought to mean it is being undervalued by close to 20 per cent, or £3bn.

The areas most likely to be served by the market are professional, scientific and technical services, accounting for 40 per cent of rentals, finance and insurance making up 20 per cent, and information and communication, adding a further 20 per cent.

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Giles Fuchs, co-founder and chief executive of serviced office company Office Space in Town, who commissioned the research, said:

With more and more businesses seeking flexible and dynamic office space, the exponential growth of the serviced office sector is unsurprising as is the fact that the valuation of serviced offices is an issue currently being hotly debated.

With the UK as the world leader within the sector, we are proud that London is the centre of this important industry dialogue and the framework that we have proposed within this report is the result of collaboration between experienced industry experts.

With strong growth expected in the next decade and continued interest from institutional investors, the accurate valuation of serviced offices will become ever more significant and important.

The UK’s serviced office market, the largest in the world, accounts for 36 per cent of the worldwide sector footprint with around 2,300 serviced office centres across the country.