The flexible office sector has certainly been in the headlines in recent times, with news following the travails of WeWork, one of the largest players in the sector and the largest private sector office tenant in both London and New York.
This latest barrage of news began with question marks over WeWork’s valuation, culminating in the resignation of co-founder and chief executive Adam Neumann, and then news that plans for an IPO have now been scrapped.
But is this a sign of wider problems and is the flexible office sector now losing some of its clout?
Our view is not yet, but like any sector in commercial property, the flexible office market needs to remain clearly focused on the financials, market demand and the changing needs of tenants.
The growth figures for flexible work spaces remain impressive, with reports that the sector made up over a third of commercial property transactions in London last year, despite only representing around 6% of the total office supply in the capital. Looking nationwide, there are now reportedly over 6,000 flex space centres across the UK. These include co-working, serviced offices and hybrid centres that offer both private offices and shared working, accounting for more than 85 million square feet of the UK office market.
As the London market and indeed other major cities have become more saturated, flexible office players have been looking further afield for opportunities. This is an area we have been working in, recently securing office sites in towns across the South East on behalf of a client.
From a location perspective, the higher office rents (and desk rates) of UK major cities are seeing businesses of all sizes look at alternative locations across the country, the vast majority of which are currently under-served by flex space providers. This is now being fully recognised by providers, with the UK’s regional flexible office market now one of the fastest growing in the world, according to recent research by Instant Group.
We are seeing this on the ground and expect flexible providers to continue to seek new opportunities in potential growth locations across the UK, focusing on high quality buildings, with good parking and close to local amenities.
For these smaller cities and towns, the favourable commercial terms and growing demand for flexibility mean that there are still many unearthed opportunities for providers to capitalise on.