Service return?

Property managers need better returns. The emerging service supply industry may hold the key

The profusion of terms doesn’t help understanding: serviced, managed, flexible. Worse, the image commonly associated with serviced office space tends to be the top-end: Berkeley Square, with 20 staff and earning £300/sq ft.
But today, serviced-space is just as likely to be 30 units of four people each, located by the M1 in Yorkshire. It could be a business incubator, a specialist media centre, or even a floor in a tower which is a lease-end and dragging down the portfolio.

The opportunity is that anyone – owner, manager, investor, developer - can get a service return. This comes about, it is claimed, because of the emergence of a specialised, experienced supply industry that exists to create and operate the concept. That means billing, service agents, support, and its heart, the services infrastructure.

“Service conversion is what we do”, says Tony Freeth of PBL Medusa, whose company exists purely to provide this service infrastructure. “We can quickly convert undifferentiated office space into discrete billable serviced units. Then add the meeting spaces, and possibly hot desks and cafes and you have a fully operational space ready to receive occupants.

“Better still, the supply industry works as a team. Any one of us will act as lead for the rest – and sort out the issues between us.”

Those occupants will be drawn from the ever increasing army of buyers wanting to licence their space, not lease. They may think short term or they may just be in a hurry. Increasingly, the reason for their interest is that they lack the internal skills or resources to service their own space.

“You need to be able to reconfigure your space to match whatever opportunity walks in the door”, observes Mr Freeth. “That means your core services – Internet, voice, networking – must also be flexible to meet vastly different needs. To do that economically we’re talking standardisation and automation.”

The resulting technology – branded Medusa - means that someone in Scotland can, at a click, join two New York rooms together, or make an outlet in Rotterdam change from voice to wireless.

Service is a percentage gained and not an absolute standard. Even workshop space benefits and un-staffed locations are just as easily serviced. Overall, the effect is to increase both space and discretionary yields.
But generally, says Mr Freeth, projects now tend to focus on identified customer groups, and prefer a larger number of smaller locations with low cost or fixed-cost operation.

“Cost control is a discipline that builds volume. We’re talking EasyJet, not British Airways. With low cost operation comes low risk, the ability to scale-up, and of course, a model that attracts investors.

“We see all sorts of principals now; investors looking for operators, property managers looking for better returns, real-estate developers with contracts to build a mix of serviced-space. Except for public sector projects, the question is always ‘can we get a better return on this space?’.

Ironically, in Denver we’re creating what’s called agency space – a managed floor for self-employed franchised real-estate professionals.”

What does Mr Freeth think attracts customers? “The key is still the Internet”, he states, “a company either does business on the Internet, or uses the Internet to link its locations. Serviced-space means ‘I can do business today’.”
But if there’s a trend that excites the Medusa people more than anything, it is what they call their “Green Worker” schemes.

“We already support thousands of branch offices in all sorts of serviced space. It’s a model that works well. Take that one stage further and host commuters in a serviced space near where they live. Do that just one day a week and an employer has 20 percent less journeys, needs 20 percent less space, and has a massive contribution to carbon-offset.”
Serviced space fights global warming? Now there’s an angle.