June 6, 2017 / 8:35 AM / 2 months ago

Fitch: Shared Workspaces Could Shrink Central London's Office Market Value by 25%

12 Min Read

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Disruptive Technology: UK Shared Workspaces here LONDON, June 06 (Fitch) Working remotely from suburban shared workspace allows savings to be unlocked for service sector employers and their employees but could see the value of central London's office market fall by as much as 25% over 10 years, Fitch Ratings says in its latest report on disruptive technologies. In London, remote work is enjoying strengthening tailwinds from wider cultural, political and technological forces. Firms that adopt this are able to downsize expensive office space, the effect of which on central London office markets could see as much as 25% eventually being shaved off aggregate value. Fitch does not expect major credit implications, however, as most lenders will have lead time to adjust underwriting before the full effects would be expected to feed through. In our 10-year "disruptive case" analysis we assess the impact of 332,500 central London employees moving into shared workspaces on a routine basis. Such a transition, we believe, would be staggered by the rate of lease roll-offs among employers amenable to changing work patterns. Without a sudden reduction in occupancy, central London office markets are likely to remain under-supplied, underpinning very high rents - and therefore the basic push factor out of the centre. This also suggests London's central business district (CBD) could become gradually more available for uses besides offices. Many service sector firms are already adopting flexible office arrangements to reduce fixed costs, facilitate expansion or consolidation and cater for growth in project-based contingent work. Economic uncertainty and changing accounting standards both favour lease flexibility associated with third-party flexible workspace. As firms in central London downsize requirements, headquarters are being designed on smart, flexible formats. So-called "agile" formats catering to hot-desking, bookable rooms and shared facilities are being incorporated into some of the new grade A office developments. The main barriers to remote working are cultural, not technological. Cloud-based solutions, IP-based business phones and an array of mobile devices supporting secure network access technology all cater to remote work. Yet few large firms have promoted remote work at scale, with the UK lagging its European peers in rates of routine homeworking. Shared workspace can overcome some concerns with homeworking, among both employers and employees. And as millennials rise up the ranks we predict business culture will evolve, lowering cultural barriers. The range of potential benefits from working nearer home is wide. Commuting places a great strain on London's transport, air quality and housing, which a suburban model of shared workspaces can ease. Moreover, local economies would be further boosted by greater disposable income and leisure time being spent in the suburbs. The extra 20 million-25 million square feet of offices needed in our projections or 1.5x-2x London's Victoria office market, reversing decades of suburban attrition, would act as a direct economic stimulus besides "crowding in" local retail and leisure investment. We believe local authorities will play a broadly supportive role in this roll-out. For employees, routine work from shared workspaces near home offers the prospect of far lower commuting times and costs. While housing in more remote locations should also become more attractive, it should leave the number of residents in inner London broadly unchanged. The market rental premium inner London commands over outlying suburbs would be trimmed, but without a surge in suburban development we do not expect any negative effect on house prices to exceed 10%. Demand for flexible workspace stock is rising, not just in the centre but now also in London's suburban orbital areas. This is driving double-digit yoy growth in supply, and we estimate market share will grow sharply from its current 5%. A scaled-up and distributed workspace model ought to appeal beyond homeworking by providing professional technology and improved facilities while also fulfilling the basic human need for stimulation from face to face interaction. Workspace that offers a range of formats - including traditional B2B serviced offices and cubicles through to B2C membership-based open-plan hot-desking (co-working) - should address most businesses' concerns around data confidentiality. Such hybrid workspace is now seeing an uptick in supply, and as it disperses across London we believe it can attract users outside central London's ranks of freelancers and SMEs. For more information on the implications of remote workspaces, see "Shared Workspaces Can Boost London Suburbs" published today and available at www.fitchratings.com or by clicking the link above. Fitch's disruptive technology series also includes reports on Batteries and Big Data. Contact: Euan Gatfield Managing Director +44 20 3530 1157 Alan Adkins Group Credit Officer +44 20 3530 1702 Peter Wormald Analyst +44 20 3530 1357 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below