City Research Online

Abstract

Purpose
This study aims to examine the impact of “space-as-a-service” (SAAS) provision on office rents in the UK and quantify premia to office rents.

Design/methodology/approach
Using hedonic modelling techniques the authors are able to quantify the impact of a number of SAAS features on office rents in the City of London using CoStar data. The authors control for the quality of the buildings by focussing on five-star buildings, rated by CoStar, as these buildings are more likely to incorporate SAAS features.

Findings
Using data on 317 transactions in 37 City of London Office buildings over the period 1 November 2004–15 July 2020, the authors find that tenant exclusive mobile applications (MAPPS) and a public terrace or rooftop command a rent premium of around £13 and £6.5 per sq. ft per annum, respectively. However, other SAAS features such as conferencing facilities, on-site fitness centre and touch down space have no significant impact on office rents. The impact of exclusive MAPPS varies with size of net lettable area.

Research limitations/implications
The SAAS real estate model is an emerging trend in the office market. As it grows in importance more research questions will have to be investigated. The present study raises awareness of the need to specify SAAS features and form a rating system that will facilitate future research on the subject.

Practical implications
The conclusion from the present investigation is that only two SAAS features have a positive impact on office (tenant exclusive mobile apps and a public terrace or rooftop), which suggest that these two features may form the basis of any future SAAS rating system. These two SAAS components should carry more weight in valuations and pricing.

Originality/value
To the best of the authors’ knowledge, this is the first study that attempts to quantify the impact of SAAS features on office rents.

Publication Type:	Article
Additional Information:	© The authors, 2022. This AAM is provided for your own personal use only. It may not be used for resale, reprinting, systematic distribution, emailing, or for any other commercial purpose without the permission of the publisher.
Publisher Keywords:	Premium, Office rents, Space-as-a-service
Subjects:	H Social Sciences > HD Industries. Land use. Labor
Departments:	Bayes Business School > Finance
SWORD Depositor:	Symplectic Administrator

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