The flexible workplace


With the rapid expansion of the serviced office sector in recent years the panel at Thursday morning's Howard Kennedy Breakfast Briefing (Simon Rusk of BE Offices, Jonathan Weinbrenn, Josh Artus of Centric Lab and Julian Sharpe of TP Bennett) considered whether this trend for flexible space is set to continue and whether this is a positive development for landlords as well as tenants and operators.

What has contributed to the phenomenal growth of this market in recent years?

Nearly 40% of the global serviced office market is currently in the UK. This growth is attributed to three key factors:

  • An increase in the number of SMEs and the self-employed requiring flexibility from their space. At the other end of the market large organisations, who wish to have project teams working in different locations outside their main office, are making use of flexible space.
  • Advances in technology. SMEs and start-ups need leading technology in order to flourish and they are looking to serviced offices to provide this.
  • Change in focus towards the end user rather than the provider. New customers want to be able to make use of services and technology as well as space in an environment which is consistent with their lifestyle choices.

Is this growth set to continue?

Only about 4% of London space is serviced at present, and it is predicted that the recent growth in the sector is set to continue in the short to medium term. The key drivers for this growth are an increased focus on the customer; current macro-economic uncertainties; and changes in accounting standards which are due to come in with the result that short term leases/licences will be more attractive as they will stay off balance sheet.

The panel felt strongly that a growth in SMEs, improved technology, and a desire for flexibility among customers will continue to fuel demand for flexible space and co working space in the longer term.

How is the traditional sector responding to this opportunity?

There appears to be a change in the perception of flexible space among landlords in recent years and it is no longer seen as the "market of last resort". The recent surge in demand for a more flexible offering together with an increase in the supply from new providers, who are providing enhanced spaces with more emphasis on IT investment, design and communal break out areas, has led to more traditional landlords showing an interest in the sector. They are seeking ways to become involved whether by letting buildings to existing serviced office providers, entering into joint ventures or providing flexible space directly. Recent examples of this include British Land's flexible working brand and Blackstone's acquisition of the Office Group. However it remains to be seen whether traditional landlords will fully commit to providing flexible workspace in the longer term especially on a larger building.

What are the benefits to occupiers of serviced office space / co-working?

The introduction of new suppliers to the serviced office market, such as WeWork, has transformed the sector and an expectation of cutting edge technology and other amenities is almost considered the norm. The serviced office market has become more user-led and "smart" flexible space and co-working environments are offering the tech- savvy millennials what they want in terms of connectivity and lifestyle.

Flexible office space is not suitable for all occupiers though and some organisations prefer more traditional lease arrangements. However, even conventional lease terms are coming down and the average lease term in London is now 6 years.

How do funders view the serviced office sector?

Traditionally, funders were very nervous of the flexible office sector and some of the caution still remains. However, a number of funders are now comfortable with providing corporate funding to the operational business as opposed to traditional property funding.


What is apparent is that, now more than ever, the demands for tenant flexibility are finally being heard. Technology is changing the way we all work – not just the millennials and it seems likely that serviced offices and flexi space is the future.