To date the serviced office sector has been largely overlooked by the investor community, but indications are that this is changing. As double digit growth rates and robust returns catch the eye of a growing number of property investors, from institutions to high-net worth individuals, could it be that Serviced Office as an asset class is about to go to the ball?
In recent years we have witnessed the emergence of a range of newly defined real estate asset classes, including hotels, care homes and student accommodation. All of these property subsectors have something in common: they benefit from additional income streams, over and above the standard rental income. This income forms a significant part of the overall revenue generated and therefore, an intrinsic part of the absolute value of the asset.
The hotel industry, probably the most obvious and widely understood example of this, is valued by the market as an operating business with income streams over and above the room rental. Rightly, these income streams such as those generated by gym facilities, conference rooms, spas and restaurants, are taken into account in the overall valuation of the asset.