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We Need You, Traditional Landlords Tell Birmingham Serviced Office Sector

Hines' Raj Rajput, Sterling's James Howarth, Savills' John Griffiths, Office Group's Charlie Green and Gowling's Matt Walker

How do Birmingham’s traditional landlords combat the growing offer from the serviced, flexible and coworking sector?

We don't, developers said at the Bisnow State of the Market event in Birmingham this month.

Traditional Birmingham landlords said the city's flourishing serviced and flexible office sector has done them a favour.

In a discussion led by Gowling partner Matt Walker, Hines Asset Management Managing Director Raj Rajput said the serviced sector meant traditional developers had to rethink.

“Flexibility is now an amenity in any building,” Rajput said.

Sterling Property Managing Director James Howarth said landlords knew they had to adapt.

“Landlords are doing more to improve our service offer, we’re on continual feedback from our client tenants. That is the main consequence of the rise of the serviced office sector. Of course amenity has to make sense for the project, it has to work on a cost-benefit analysis, which is what we’re doing at our 103 Colmore Row development,” Howarth said. “But I have to confess I occupy space in one of The Office Group’s serviced offices in London and I like it. The level of amenity is good, and there is definitely a place for both traditional landlords and serviced operators.”

More change is coming, according to panellists Office Group Chief Executive Charlie Green and Savills Birmingham Head of Development John Griffiths, and traditional landlords would be wise not to resist.

The Office Group is mulling plans for a 150K SF Birmingham serviced office portfolio.

“We don’t necessarily see this as a fight with traditional landlords. After all, flexible workspace is less than 4% of the office market, so from that point of view it is kind of irrelevant. The changes are more basic than that, because now everyone has to address how you provide real estate after the changes we’ve seen in the last four or five years, which have been extraordinary. We have WeWork to thank for that, and the spotlight they have thrown on our sector. But the change is about a rebalancing of power between investors/developers and occupiers, because the balance has now shifted and occupiers have the power,” Green said.

“This is a structural shift in real estate, where occupiers can say they want these things from a workspace and if you don’t have them, they will go elsewhere. Anyone who doesn’t respond to that is in trouble.”

Griffiths welcomed the changed power structure.

“If we are all honest with ourselves, for too many years there was a huge amount of complacency in the property sector, with institutions that were too powerful and did not engage sufficiently with what occupiers actually wanted. A market like that wasn’t serving anyone’s good, with long leases before the end of which the building was pretty much not fit for purpose. That slowed change, and we should be grateful to the serviced sector for shaking the market up.”