CoStar Column: Brexit decision deals another blow to the long lease25/07/2016
The UK vote to leave the EU has dealt another blow to the long lease, writes Steve Jude, CEO of serviced office groups Citibase.
The vote came in for out, the pound hit rock bottom, it’s all change at the top, Gove shuffled along, Boris bounced back and interest rates, for now, are staying put. Throw in another underperforming sterling, Euro exit and resigning gaffer and that just about covers a roller-coasting few weeks when some say we went off the rails.
Can our economy remain on track? I’ll leave that to the new, oldest incoming PM since 1976 and the biggest cabinet reshuffle since the Courts furniture fire sale to fathom. What’s clear is we need to play the long game. But what if I said it doesn’t necessarily follow that a sense of short termism is a bad thing. Let me explain.
Perhaps you’ve just got back from a summer sojourn that left you more out of pocket than would’ve been the case had the world stayed the way it was. Consider yourself lucky to have enjoyed an escape from the furore which means some others may not.
But if you hadn’t paid upfront would you still have hit the beach? What if you’d been locked-in to shelling out on this same holiday for the next 10 years? You might well have preferred to cut your losses and save for a less rainy day. Let’s take a sunnier stance: say you’d cashed in on the new world, maybe you’d want to splash out on an upgrade. Either way, what if you simply fancied a change of scenery? Stay with me.
Certainty breeds comfort and recent, improbable events have shown us the mirror image of that equation holds true. In uncertain times, we all need flexibility to adapt to change, good or bad. Being tied down and up in knots doesn’t suit anyone. Small wonder, then, that SMEs which thrive on being nimble crave more flexibility, too.
The world of work is changing and Brexit is yet another blow for long leases on commercial property. The result of the in-OUT vote may have put the brakes on economic green shoots, only temporarily I’m sure, but it will only accelerate the trend towards flexible serviced office space. I’ve already seen the effects take root.
Last month, as uncertainty surrounding Brexit surged, our Citibase sales team recorded the biggest monthly figures by volume and contracted revenue, ever. If that’s not proof enough, in the 10 days following the referendum we’ve handled a 10 per cent spike in call volume at our reservations centre. Demand is on the up and up.
Curiously, there are building owners and occupiers still sitting idle, hoping someone comes knocking for a long lease. They’ll be waiting a long time. I do question why, when our central sales team is handling 5.3 million sq. ft. of demand every year.
Last year we made £8m for landlords and building owners – a tenfold increase in just seven years. Those open to taking out a management contract with a serviced office provider, which has the expertise, like Citibase, to convert their under-utilised space into a cash-generating business centre, could join in reaping the benefits of the new world order.