Cross post on SRV

The serviced office business has no barriers to entry. It is also difficult to get any meaningful advantages by being the lowest cost player via economies of scale. As stated by others, these businesses have large operating leverage due to high level of fixed costs and low variable costs. 

The way I see it, SRV is a play on very good and shareholder friendly management. Just like the insurance industry, you want management which is disciplined and focused on the bottom line for the long term future, as the industry is prone to be buffeted by economic cycles.  Management of SRV is savvy in that they pick their spots carefully in the market instead of trying to be everywhere and everything for everybody, a strategy used by Regus. Focusing on great service, great locations and innovative business solutions allow them to attract and keep high margin customers. As a contra reference, just Google "Regus Complaints" and you will see the point of distinction with SRV.

Due to the inherent cyclical nature of the industry, one needs to fully understand the boom and bust economic cycle (something I really need help on), to watch carefully what management does in good times and in bad times, and as always, to pick a good price for entry.  A lack of understanding will result in ruin, because it is precisely when things are all hairy and ugly that one should start buying, and precisely when things are going gangbusters that one should be selling. For SRV, it is in the midst of both economic downturns post tech crash and post GFC crash, when things are looking bleak and financials are weak that presented great buying opportunities. 

Over the very long term of say 10 to 20 years, I would venture to suggest that SRV under current management will increase intrinsic value quite steadily plus a respectable dividend return, however the ride will be very bumpy like a rollercoaster.

On a side note, plays such as HUB and other hipster plays are probably in a different market segment. For example, if a corporation needs to send over a specific team to implement a project in a specific location, serviced offices provide the ideal short term solution. No such team would want to work in a HUB or a hipster work environment. As we move more towards an information based economy, the need for segregated and quiet space for concentrated uninterrupted work increases.  As such I see no systemic risk to the underlying demand for serviced offices.