“In a climate of economic uncertainty, serviced offices and coworking spaces will become the go-to option for those seeking flexibility, business support and value for money.”
– Richard Smith, CEO at Search Office Space
The big picture
Since the beginning of the year, businesses in Britain (and beyond) have been navigating their way through economic uncertainty, bought on in part by bemusing Brexit negotiations, proposed changes to business rates and other policy amendments that have made it more difficult for them to commit to long-term ventures. In order to adapt, they are turning their back on long-term leases in favour of flexible workspace alternatives such as coworking and serviced offices.
The face of business is also changing: the transient nature of the gig economy is fuelling the need for short-term agreements and contractual flexibility. Not only are flexible workspaces more financially viable, they are proving more popular than ever before because they promote employee wellbeing and productivity.
Richard Morris, Chief Executive at Regus UK sums up the sentiment surrounding flexible workspace concisely in his comment for Raconteur:
“One of the biggest trends is the growing recognition that a creative, collaborative working environment is vital for the generation of ideas, for fostering team spirit and for improved productivity and innovation.”
Another successful year for flexible workspace providers
Long-established flexible workspace providers continue to prosper as new ones enter the market every day.
- The Office Group’s acquisition of Eccleston Square in London Victoria this year brings the company’s property portfolio to over 1.2 million sq ft.
- WeWork is confident London will remain a major startup hub post-Brexit, and has lease commitments of over £2 billion in the UK over the next 25 years.
- Regus continues to expand outside of London, demonstrating the need for flexible workspace not just in the capital, but across the UK.
- Popular newcomers including Mindspace, LABS, Fora and Techspace opened their doors to startups and SMEs this year and are set to open more locations in 2018.
The Coworking Trend
Fuelled in part by the gig economy, the coworking concept has taken the commercial property sector by storm over the last few years and is now firmly rooted in the market. In a coworking space, people from different companies and organisations cohabit in a shared work environment. Although some coworking spaces are industry-focused, many spaces host businesses from a range of industry sectors.
It’s official: coworking isn’t just for freelancers, startups and entrepreneurs. Blue chip organisations have bought into the trend too, including the likes of Microsoft and HSBC. In fact, 75 per cent of FTSE 100 companies have flexible workspace on their property portfolio. Coworking spaces promote a culture of innovation and entrepreneurship; agreements can be tailored to the individual’s requirements and they make for perfect short or long-term project spaces.
- Flexible, short-term agreements simplify the process of scaling up or down
- Networking events are abundant, as are opportunities to collaborate with other members
- Memberships with larger operators often allow the occupier to work in multiple locations
- Spaces tend to be fully-fitted out and serviced, enabling the occupier to focus solely on running their business from day one
- London has the largest market for serviced offices in the world with approximately 16 bn sq ft of space – and counting!
- The UK hosts some of the largest coworking spaces in Europe*
- Coworking memberships in the UK have risen by 52% since 2016*
- €171 is the average price for a coworking membership in the Eurozone*
Coworking styles: Something for everyone
This serviced office in Paddington contains coworking space that fosters collaboration between project teams. Floor to ceiling glass walls promote transparency and productivity.
Many serviced offices offer a combination of coworking and private office space, like the News Building near The Shard in London Bridge. Residents can choose from hotdesks, permanent desks or occupy a private office.
Coworking spaces like this one appeal to creatives and tech startups who thrive on collaboration. These buildings often host events that give occupants the chance to get to know each other and share skills.
The pro-working concept was born out of the need for ‘professional’ flexible workspace, fit for mature, more established companies and sectors.
We’ve added numerous innovation centres to our portfolio of flexible workspaces. These spaces offer business acceleration and growth services alongside coworking and private office space.
Average cost of a workstation
The London Picture
Search Office Space covers the majority of the serviced office market. Based on our data, the average cost of a workstation in London is £550, almost 60% higher than the UK average. Unsurprisingly, London also gets the most flexible office space enquiries, accounting for around 50% of all UK enquiries this year. The number of flexible workspaces operating in the capital stands at 1056 – an all time high.
This year, London has defended its title as Europe’s tech hub and is home to the largest serviced office market in the world. As such, prices in key London locations have inevitably continued to rise. In some areas, however, prices have dropped. The priciest locations to rent office space continue to be districts in the West End like Mayfair and Soho, followed by City of London locations such as Holborn and Bank.
We provide some insight into why such dramatic changes have occurred in key London locations.
Average 2017 workstation cost in key London locations: Increase/ decrease from 2016
*Search office space data
1) Demand has been strong this year and lot of new grade A serviced office space has entered the market in this area, courtesy of operators like TOG and One Avenue Group.
2) There haven’t been many new openings in the area this year and the regeneration of King’s Cross hasn’t extended as far as Euston, although plans for a £5.3 billion revamp are in the
3) Since Google moved here, a lot of European companies are utilising King’s Cross as their headquarters.
4) An increase in readily available flexible workspace is driving prices down in this part of the West End.
5) London’s fintech hub is becoming saturated with operators trying to get on the coworking bandwagon; many operators are just a stone’s throw away from each other.
6) Demand and lack of space has driven prices up in Soho.
7) A large regeneration programme, wealth of high quality new buildings and excellent transport
links have led to an increase in demand for office space in Victoria.
The UK Picture
Although growth in the sector is most prominent in London, flexible workspace providers are expanding in almost all large regional cities as well as secondary and tertiary towns, in line with the growing trend for flexible working. It’s easy to understand why renting outside of London is proving popular: despite increases of up to 25% in some areas, the average cost of a workstation elsewhere in the UK averages at around £232.
*Search office space data
1) HS2 is driving flexible workspace rates up and will continue to do so for a year or so.
2) Some of the leased office space in Bristol has been converted into residential property. That said, there is still a good range of flexible operators to choose from.
3) The flexible workspace market and industry sectors in Glasgow have been in decline for a while.
4) The Manchester market is saturated with options and this is causing prices to fall.
5) This increase can be linked to Crossrail opening in 2019, making access to London easy.
6) Lowered office space prices coincide with the slowing down of the oil industry in Aberdeen.
In January 2017, workspace providers shared their plans for the year…
“LEO is proud to benefit from a fantastic reputation within the premium serviced office market. Due to demand and our growth plans we are focussing on an aggressive acquisition plan for 2017 so we can continue to offer our clients the best business addresses and properties in London zone 1 and will work with major landlords & private investors to achieve this plan. This first building added to the portfolio is an extremely exciting Victoria location, Nova South, SW1 which is on schedule to welcome its first clients in April.”
– Beth Hampson, Sales and Marketing Director at LEO
In 2016, WeWork doubled its buildings, cities, countries, and number of members. In February 2017 alone, we had 12 openings and added over 9,300 members in 8 cities across three countries. We also added a new market (and state!) to our family – welcome, Detroit, Michigan! We are focused on our global expansion in 2017 in order to provide more locations in more places for our international membership.
In 2017, we plan on accelerating TOG’s growth plans – we currently have a portfolio of 1.2m sq ft and we have a fully funded plan to reach 2m sq ft, opening new locations as and when suitable opportunities arise. As well as new building acquisitions, we are excited about developing our secure pipeline of new flexible offices. Our workspace in Derwent’s White Collar Factory in Tech City is due to open in the summer and work starts soon on Tintagel House, which is on the riverfront in Vauxhall near MI6. At over 90,000 sq ft, this is the largest TOG building and is being developed with an award-winning project team including Stanton Williams and Universal Design Studio.”
-Olly Olsen, co-CEO at The Office Group
“In 2017 Office Space in Town will add to its growing portfolio of London offices. Across the group of offices, Office Space in Town is pioneering facilities, such as serviced bedrooms at the Monument office and ‘club’ membership giving occupants access to all Office Space in Town buildings. The firm continues its ongoing discussions with international investors to secure funding for new projects, with strong investor interest in London and the serviced office sector. We expect an increase in demand for our offices and serviced offices generally as more businesses react to Brexit uncertainty by moving towards flexible working and scaling their workforces down.”
-Office Space in Town
2016 marked a strong year for the business with a roll-out of new workspace across the length and breadth of the UK. We continue to have a major presence in the UK’s city centres and impressive new spaces were opened in locations such as London, Glasgow and Belfast. There is also a focus on regional expansion, fulfilling the demand for flexible workspace options for professionals outside of the biggest cities. Recent openings include Salisbury, Ashford and Southampton – areas that have perhaps been well served by traditional office space in the past but not necessarily by newer, more dynamic and flexible offerings.
Users want different types of space, different styles and different levels of co-working space relative to private space. Our suite of services means that our hubs appeal to professional firms from a broad range of sectors and at very different stages of development. This is a vibrant and exciting time for the industry.
-Richard Morris, UK CEO at Regus
Navigating the growing flexible workspace market
“100% free, first class service”
Search Office Space is the longest-running flexible office finding service in the world; we offer a bespoke service to each client, creating search reports based on our local area knowledge, arranging viewings at properties and negotiating the very best deals.
We cover 99% of the global flexible office market and have matched thousands of entrepreneurs, startups and long-standing businesses with their perfect workspaces.
“Once again Search Office Space gave first class service. This is the second time we’ve used them and the service was fast (I’d only just pressed send on the email when I got a phone call!), friendly and efficient. From sending our initial enquiry to signing an agreement on our new place has taken three days.”