Thriving serviced office market leads the way for agile businesses in uncertain times
Submitted by Catrin Jenkins on
With the last budget this week, before Article 50 is triggered, businesses are looking at cost savings like never before. Since the last financial crisis one of the biggest cost savings has been the move towards more flexible office space solutions. However, there was a time when serviced offices lingered on the edge of the commercial property market. In the 1980s and early 1990s, flexible workspace was a pocket industry with a handful of operators and a smattering of serviced office centres.
Fast-forward to 2017 and they now number in the thousands, with around one-third of all UK serviced offices based in London.
Last year a report by flexible workspace broker, Instant Offices, revealed that the UK is home to almost 3,000 serviced office centres - a rise of 11% compared with the previous year. In 2015, the annual growth figure was just 3.5%.
The rapid rise of flexible workspace hasn't come about by chance; nor has the exponential growth of serviced offices in Central London. Indeed, enquiries for flexible workspace in London continue to grow, especially for the City and the West End - traditional office hotspots and the location of Landmark Offices' six business centres.
Far from a flash in the pan, this surge in popularity has been building steadily - and it's showing no signs of slowing down. So what's driving this accelerating demand for flexible workspace?
As Judith Evans reported for the Financial Times last year, a significant portion of the flexible workspace boom can be traced back to the financial crisis. Severe cutbacks and job losses triggered a wave of new startups and entrepreneurs, which began fuelling greater demand for flexible, scalable spaces.
In addition to new starts, those firms that transcended the financial crisis were forced to review cost efficiency, and commercial property - typically the second highest overhead behind staff - came in for the cut.
According to CBRE, traditional offices were - and in many cases are still - sorely under-used. The firm cited that only around 50% of space within traditional offices is used during the working week. Combined with long-term leases and high maintenance costs, it's little surprise that greater workspace flexibility and efficiency has become mission critical.
This has led to greater demand for serviced offices and its membership-based counterpart, coworking. Indeed last year, research by Capital Economics found that the serviced office sector has grown by 31% since 2008.
Not only that, this trend is also evident in new services posed by traditional commercial property firms.
Savills, a leading commercial property advisor, recently launched a new brokerage service focusing specifically on flexible space. Explaining their reasons for moving into the serviced office market, Cal Lee, head of the new space-finding service, said:
"Over the course of the last few years the UK in particular has witnessed considerable growth in the flexible work space sector, with many new entrants coming to the market.
"At the same time, demand for flexible work space continues to grow as more businesses, including start-ups, SMEs and even larger corporate companies, are seeing the benefits of flexible work space over a more traditional lease."
Those major benefits are flexibility, cost efficiency, and all-inclusive packages that take care of property essentials including building insurance, maintenance costs, cleaning, and furniture provision. These serviced office 'bundles' remove time-consuming and often costly maintenance requirements, leaving occupiers free to focus on running their business.
Naturally, this appeals to a much wider spectrum of business than startups and SMEs.
The flexible workspace concept has universal appeal and is attracting growing numbers of large, established firms and corporates. Landmark Offices itself accommodates a number of corporate companies, who rely on the space for a variety of requirements ranging from swing space and short-term project offices to new branch offices and overflow space.
In short, it works. Chiefly it comes back to greater need for flexibility in a competitive, past-paced and constantly evolving business landscape. As Instant's Tim Rodber discussed in an interview with Property Week in February 2017, this is no anomaly.
"Businesses are looking for larger parts of their real estate to be run in a dynamic way; they are not looking for long-term commitments," he said, explaining that the number of enquiries Instant receives for 25-plus and 50-plus desks in London has rocketed by 25% in the past two years, which is indicative of larger corporates taking bigger space in serviced offices.
That is underscored by the typical lease length, which according to Rodber, has fallen dramatically in London over the course of the past decade, from 20-plus years to approximately seven years.
All things considered, flexibility has become the calling card for workspace requirements. Agile office solutions are now a major priority both for corporate occupiers and small businesses, and with built-in cost efficiency and scalability part of the package, we can expect to see still greater demand for flexible serviced offices over the coming year, and beyond.