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Published 8 November 2018

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By: Estates Gazette

Five-star serviced office operator London Executive Offices is on the acquisition trail, Tim Giles, its chief executive, tells me as we are chauffeured around London to inspect some of the company’s portfolio.

The firm was bought by Queensgate Investment Fund for £260m last year. Recent acquisitions have seen the portfolio rise to 30 offices in central London. “I can see us approaching 40 buildings by the end of next year,” says Giles. It is an ambitious target but the firm has proved it can move swiftly, adding five new buildings, including 24 Berkeley Square and 85 Gresham Street, in the last 12 months.

Lease, sale or jv, it doesn’t matter: the firm owns 10 of the 28 buildings in its portfolio. But what makes the task that much more challenging is that LEO has very specific building types in mind. If you look at the addresses in its portfolio you’ll get the idea – One Cornhill, 33 St James’s Square and 78-79 Pall Mall are just three.

“Location is important. We go micro to the point of which side of the road, so we prefer the north and east sides and period buildings because they are interesting. It is about the customers.


London Executive Offices isn’t the only show in town when it comes to luxury serviced offices. Ventia, Serve Corp and Landmark Business Centres are just three operating in central London. “Almost every services office operator is acquisitive,” says Stewart Smith, executive director, CBRE.

“The market balance has changed very quickly from 10-year leases with break at five to a 10- to 15-year lease. Although businesses are growing, they are not growing that rapidly, so if you can put an intermediary between them and their real estate – they have to pay a
premium but they aren’t tied in.”

Ben Thomson, head of city acquisitions, Deloitte Real Estate, adds: “In the 1990s the serviced office occupier was an occupier of last resort. Now serviced offices have a lot more credibility.” He adds that demand is rising because of the shortage of small office suites. Flexible leases, no facilities responsibilities or fit-out costs, together with the ability to expand rapidly, are also adding fuel to the demand.and the customers’ reputation and image, not ours,” he says.

LEO’s competition for buildings isn’t coming from office developers, not in Mayfair at least. It is from residential developers looking to cash in on the luxury homes market.

So “dull boxes” are out for the firm’s FTSE 100 occupiers and 1,800 virtual customers. Giles sees a gap in the market, a dearth in small office suites of 2,500-4,000 sq ft. If you take out reception and meeting room space it comes down to the same amount of desk space as LEO offers.

LEO’s USP is a luxury environment and service – hence being particular about buildings. There is no branding and LEO doesn’t take a “cookie cutter” approach to fit out. On the tour (see right) I noticed one or two consistent features such as a distinctive style of lamp but that was about it. Giles says LEO wants to offer a choice, a variety of buildings within a small area. The company has no plans to move outside its core City, Midtown and Mayfair locations.

So why is now the time right to expand? “London is continuing to see exceedingly high levels of interest from both UK and international occupiers. Business confidence has improved generally and savvy companies see the flexibility and unparalleled service levels that we offer as truly compatible with their businesses,” says Giles.


* £260M price Queensgate Investment Fund paid for LEO last year
* 500,000 sq ft of space
* 28 offices
* 900 office occupiers
* 1,800 virtual occupiers
* 600 meeting rooms
* 3 years’ average stay
* 4-5 desks used by typical occupier


So what is it like working in a luxury serviced office? Estates Gazette’s deputy regional editor Lisa Pilkington and I set up a “City office” in London Executive Offices’ One Cornhill to find out.

First thing to note is that the entrance hall and reception does feel like you’ve walked into a luxury hotel.

Our three-desk office had wonderful views of the Bank of England and the Royal Exchange, lots of natural light and functional desks. There were clues that you were somewhere five-star, such as the bottled water and glasses on the side and, along the corridor, a kitchen with a range of tea and coffee together with snacks and a fridge full of chilled drinks. It was all help yourself.

There were formal meeting rooms (with in-house dining if required) and an informal meeting lounge full of big, comfortable sofas as well as tables and chairs. A waiter service for tea or coffee, which is served in proper china, was also available. Starbucks this isn’t.

For a less formal working space outside our office, we headed to the basement where we found another kitchen, communal table and individual work space together with little booths for making private phone calls.

We did poke our noses around the door of the business centre and encountered hot desks for those just popping in from out of town.

Back up in our office we had preordered a “room service” lunch. A relative feast was delivered, which meant we could work through without having to go out to grab a sandwich.

The other occupiers we met in the communal areas always gave us a cheerful greeting. We weren’t expecting such a community atmosphere, though we would rather not have heard the gentleman’s “indigestion” in the office next door. Apparently better soundproofing is the next phase of refurbishment.

Prices of a desk per month vary depending on the building, starting at £650 plus VAT in the City rising to £1,900
for the very best space in the West End.

Under Queensgate’s ownership the business has access to more liquid finance but, with capital values rising and luxury fit-out costs to pay, each potential acquisition is rigorously assessed.

“LEO’s strategy is acquisition by organic growth that is funded by LEO’s own strong cashflow. We look at every opportunity on
an individual basis and assess it on its own merits. Generally we target total capex payback inside three years,” he says.

Having worked in the serviced office industry for more than two decades, Giles has seen his fair share of trends and
market cycles. The sector is maturing, he says, and attracting more international occupiers and financial services.

Occupancy runs at 90% and businesses stay for an average of three years. “People choose us because of the property but stay because of the service,” says Giles. LEO is looking to launch a six-star offer in the near future. When it does, it might be time for another EG test run.

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