Flexible Workspace: why all the hype?

Flexible Workspace and Coworking are the buzzwords of the moment in the property market – our specialist Shaunagh Durkin explains why everything from BREXIT to babies is impacting this fast growing and exciting sector!

Co-living, luxury retirement villages, shared ownership… The world we live in is changing and the way we live is evolving. We spend most of our lives in work, so naturally this is changing too.

Over the last 5 years there have been many trends to emerge that impact our work lives, including a rising awareness of wellness and mental health, an increase in sustainability commitments and more adaptable working hours.

Arguably the biggest workplace trend to rise in the last 5 years (at least!), is flexible workspace. The UK flex space footprint has increased 25% per year in that period, in comparison to 9% growth the previous. There are now an estimated 2,800 businesses with flex space in their portfolio in the UK. London is the largest city market in the world for flex space and take up in the Big 6 cities stands at approximately 10%.

But why is it so popular, and why now?

Risk aversion

Uncertainty surrounding post-BREXIT Britain has led to an increase in flexible workspace take-up. Businesses are using it as a safety bet against a shortening planning horizon as, if they need to act quickly, they have the flexibility to do so. In a cyclical economy, flexible workspace also allows a cautious approach for companies looking for office space.

Market disruption

Due to occupier demand for more choice and a single product with space and service packaged up, we have seen increased differentiation and stronger USPs, such as workspaces targeted at specific industries or child friendly offices. Occupiers want to be in an environment that facilitates their networking with like-minded professionals and spurs growth.

Increasing market perception and confidence

The challenge of valuing flexible workspace assets has been somewhat forgotten and the market has adapted its approach, increasing confidence in investors.

Increase in large corporate occupiers

Businesses seeking quicker growth without the burden of additional CAPEX or having to manage the process themselves often look to flexible workspace providers who take on this obligation.

You can’t ignore it forever

Conventional landlords took notice of the surge in the market entered it for the first time and joint ventures are being formed with landlords and operators or consultancies and operators.

Increased productivity and collaboration

Researchers have found that coworking inspires increased productivity more than regular offices. Professionals networking in the same industry provide opportunities to learn from each other and discuss challenges and best practice. Many coworking operators also schedule a series of yearlong events aimed at entrepreneurs and SMEs who may lack access to resources larger businesses have, including online-security advice, managing finance and people-management.

One size does not fit all

Where previously occupiers had to adapt to the space, there is so much variety in the market providing the opportunity to scale up or down as needed.

Looking to the future – our predictions for 2020 and beyond

1. The market is still in a state of growth and we have not yet seen the battle for market share. Whilst there are an incredible number of businesses with flexible workspace in their portfolio, it is an incredibly competitive market still, meaning for every operator entering, there is likely one on the brink of exiting. We suspect the percentage of office stock take-up will increase, the number of operators to level out and the market share to increase for a handful of experienced and some of the niche operators.
2. As more corporate occupiers come to the flexible workspace market, the demand for more individualised offerings will rise, for factors such as increased privacy, company breakout spaces and private board rooms. We’ll see larger flexible workspace centres incorporating more community areas too as the need for space to accommodate hundreds of workers increases.
3. Take-up in the Big 6 is on the up but the secondary markets could be the real spotlight for growth in the next 2 to 3 years. Places like Reading, Cardiff and Liverpool already boast a colourful array of operators. Watch this space!

Whatever the future holds, all research points to a very exciting period of growth across the UK. It’s fantastic to see the pattern of growth London experienced being predicted for the regions and we are confident flexible workspace is a trend that is here to stay.

What reasons do you believe have contributed to the growth? Where do you see the market going? We would love to hear your thoughts so please get in touch!