Recession Opens Doors for Suites Operators

Among the reasons cited by Locartis and other operators of executive suites for expanding in the current downturn is that more and more corporations are turning to office business centers for a wider range of business units, including those with up to 50 or more office workers. In addition, SVP of global corporate services Bill Mooney of CBRE points out that leasing space in a business center appeals strongly to many tenants in today's uncertain economic client because such leases typically offer "a range of flexibility that is much higher" than that of a conventional office lease.

Another European firm, the UK's Avanta, recently launched operations in India and said that its office bookings have grown in the recent past "mainly because more and more corporates are turning towards serviced offices for their operations than going for traditional office spaces mainly to avoid heavy upfront investments." Avanta, which launched in 2004, now manages more than 740,000 square feet of office space across 21 locations and is continuing its UK and international expansion programs.

Among the other US firms that have entered the office suites fray are OfficeOne in Florida, which made its debut with an executive center in Aventura, FL. As GlobeSt.com reported, OfficeOne joins the existing short-term lease market in Miami along with other operators such as Intelligent Office, which has five locations in South Florida, and worldwide player Regus Group, the largest provider of workspace solutions in terms of executive suite rentals, meetings rooms, training facilities and virtual office space.

Other US operators who have expanded include two Orange County-based firms, Premier Business Centers and TechSpace. Premier, which is an affiliate of the Irvine-based Bascom Group, points out in one of its news releases that "the ongoing US recession has forced many attorneys, mortgage companies, residential real estate, and financial and professional services companies to either vacate or consolidate their facilities." Premier cites research by CB Richard Ellis showing that tenants are electing to right-size their office space to be more in line with market conditions, choosing smaller suites, shorter leases and more flexible terms.

At Aliso Viejo-based TechSpace, the company says that office space users are looking for shorter-term deals and flexible options for expanding and reducing their square footage in light of the difficulty of forecasting their future space needs in these uncertain economic times. TechSpace operates facilities in Aliso Viejo as well as in Boston and New York City.

As Mooney of CBRE points out, the executive suite operators represent an appealing business proposition for landlords not just during the recession but also in better times when tenants grow. "These centers tend to be terrific incubators for larger space needs within a building," Mooney says. "It's very common that a tenant will take two offices in a shared executive office suite and two years later they are taking 10,000 square feet in a direct lease with the landlord.