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    1. May 2019

    2. Making the grade: is Cat A+ here to stay? Will CAT A+ plug the gap?

      31 May 2019
      The rise of serviced offices in London has created a subject for landlords to debate recently. In recent times some landlords have implemented pre designed offices with full fit outs including the necessary cabling works enabling a fully operational ‘turnkey office’ for a tenant to move into from day 1. This has become known as a ‘Cat A+’ delivery.
      Finishing a space to Cat A+  has been found to have its benefits, helping tenants to visualise the end product  rather than an empty floor possibly in a shell condition.
      Certainly when comparing a vibrant serviced office full of life to a blank canvas conventional office floor it can be more difficult to imagine the finished product. The Cat A+ strategy has been implemented to stem the tide of tenants eschewing the hefty upfront fit-out costs and deposits of conventional leases in favour of the new wave of hi-tech serviced offices now flooding the market. Serviced offices certainly solve a short-term problem with no initial Capital Expenditure required, but it’s a silver lining with a heavy cloud: all those events, wellness rooms and on-site cafes make a beguiling offer, but they come at a price – sometimes three times the rent of a conventional lease and reviewed on an annual basis. So once a firm grows up, has money in the bank and needs more space, their eyes begin to turn to their ongoing monthly outgoings.

      This proved the case at 25 Watling Street where all but one of the floors were let in a Cat A condition, but where the final unit was proving rather stubborn. With a contractor already on site the landlord elected to build a Cat A+ fit-out and, low and behold, a tenant was found less than 4 weeks from completion of the works. 

      Cat A+ bridges the gap between the time and cost of employing contractors, and the higher monthly outgoings of a hip co-working space, but the current model has predominately only been tested on the sub 5,000 sq ft market. In most cases a universal layout including meeting rooms, breakout area, kitchen with a breakout area can be used as a template. But as organisations expand, they develop very singular needs for their working environments which are impossible to second guess and may require additional capital to design and build which creates risk to a landlord indicatively delivering these works with no certainty it will secure a tenant. 

      The problem of speculative Cat A+ fit-outs is the shifting of immediate financial outlay to landlords with no certainty of timeframe or success in securing a tenant. It leaves many feeling understandably uneasy and it’s not a burden we expect landlords to embrace any more than is strictly necessary, and most definitely not indefinitely.

      So is there another way? We think there might be.

      Should Cat A+ build a proven track record, which may take several years to reassure landlords, will we see landlords attempt to speculatively deliver fit outs alongside a comprehensive refurbishment or even newly developed/ redeveloped scheme? As was the case with 25 Watling St aligning works whilst contractors are onsite certainly saves cost. Should Cat A+ case studies continue to support the claim that they can minimalism void periods for a deal package equal if not greater than the blank canvas model we expect this will be a strategy some landlords simply cannot ignore. 


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