London Owns Lion’s Share of Flexible Office Space
A new breed of flexible office providers is shaking up commercial real estate worldwide, and landlords and investors are taking notice, according to Cushman & Wakefield report “Coworking 2018 – The Flexible Workplace Evolves.”
So far, London is king when it comes to flexible workspace, which offers less restrictive and shorter leases, as well as room to grow or shrink and a host of turnkey office services. London easily outstrips other European cities and even New York City in terms of space and number of flexible office operations. An estimated 10.6% of office space in London is flexible, or the equivalent of 10.7 million square feet, compared to Manhattan’s 2.9%.
It’s not just London. A similar surge is occurring across other U.K. cities, as well as key European cities, according to the report. For instance, Dublin’s availability of flexible workspace jumped to 7.9% in 2017, up from 0.7% in 2016, while Amsterdam’s supply of flexible offices grew to 6%, up from 4% during that period. The report anticipates that the trend will accelerate across Europe, fueled in part by the tech and startup scenes.
The Asian market is immature compared to the U.S. and Europe, but it has been expanding at a faster rate over the last couple years, according to Cushman. By 2030, at least 15% of total office supply in Southeast Asia could be flexible, with Hong Kong, Singapore, and Shanghai leading the way.
The reason for the uptick? It’s less expensive for companies to enter flexible workspace arrangements than to renegotiate to extend their leases for another six months. Add to that, work styles are changing and the competitive landscape demands more agile operations, work-life services, and on-site services.
In fact, the biggest leap in demand for flexible workspace has come from startups and large businesses looking for corporate headquarters. The market for flexible offices for startups grew 13% and large company tenants showed 5% growth over the last three years. Those segments — fast-growing startups and large companies — are expected to drive expansion in the coming three years as well. Large company growth should hover around 13% growth and startups around 16%, according to Cushman’s projections.
The progress could be hindered, however, if operators struggle to find suitable space in the coming years or if there’s a significant economic downturn, drop in office rents, or shifts in which landlords begin to offer more flexible leases, the report states.
But, as of now, Cushman’s research shows that it’s no longer simply about providing an office building, but rather adapting to where and how people want to work. Businesses want more office services and flexibility to accommodate the inevitable pivots they’ll have to make. Says the report, “Flexible workplace is here to stay as the world of work has fundamentally changed.”