Sept. 5, 2017–Flexible workspace operators can expect an extended spike in occupier demand for flexible workspace, according to a white paper produced by sector specialist GKRE.
Douglas Green, director of GKRE, comments:
“There has been a revolution in the workplace over the past few years with flexible space moving from the fringes of the market to centre stage. Britain is at the forefront of this revolution and demand is growing year on year. The sector is leading the way in offering a working environment that meets the needs of the 21st-century occupier.
“The explosive growth of the market has so far been driven by changes in the way people work and the rise of the freelance economy. This will continue and there are other factors too that will lead to its further expansion. These include changes to the rules on lease accounting and the fact that large corporates and professionals are embracing flexible office space properly for the first time.”
The growing demand for space from operators has led to landlords, including leading property companies and institutional landlords, rethinking their letting strategies. Says Green’s co-director, Will Kinnear:
“Buildings that were once the exclusive home of large corporates – including ‘trophy buildings’ such as The Shard, The Gerkin, Tower 42 and the Lloyds Building – are now actively seeking out top flexible workspace operators as part of their tenant mix. Occupiers of flexible space were initially just entrepreneurs and SMEs looking for an office away from home but now include larger corporates, professionals and established companies that require flexibility, or overflow or project space.”
The flexible space market’s rapid advance has seen a number of new operators enter the market in recent years. There have also been a series of deals between some of the bigger players that have consolidated of the market.
The white paper lists the UK’s main operators and sets out how many centres each has, how many square feet they have in total and how their centres are divided between London and the rest of the UK.
GKRE believes that the increasing importance of the flexible space sector to the property market will lead to flexible offices being recognised as a separate asset class. Currently, the RICS Red Book contains no guide for valuers when valuing flexible workspace.
Says Douglas Green: “The recent announcement that Blackstone has bought a majority stake in The Office Group, valuing the business at £500m, shows how seriously the flexible office market is now taken.
“This isn’t yet recognised in the investment market. Until flexible workspace becomes an asset class in its own right, with detailed supporting evidence of its ‘value’, larger investment into the sector may be held back. However, we are starting to see buildings let to flexible workspace operators sold as straightforward investments, such as 33 Queen Street and 1 Fore Street, thereby providing evidence of investment yield.”
Other key trends GKRE expects to see this year include:
- Property companies developing their own flexible workspace, and so bypassing the operator and providing a landlord function direct to the occupiers, and
- An increase in demand for managed space, allowing tenants to simplify the way they take office space.
The white paper contains a series of fascinating tables that show:
- The flexible workspace operators in each of London’s trophy buildings
- The UK’s largest operators, including the number of centres, square feet, and the split between their London and regional operations
- The number of centres in each of the UK’s major cities and average workstation rates.
For more information and to download GKRE’s white paper, go to http://www.gkre.co.uk/index.php/reports/the-flexible-workspace-market/
GKRE is the UK’s leading specialist flexible workspace agency. Founded in 2013 by Douglas Green and Will Kinnear, the directors bring to GKRE more than 25 years’ experience in the flexible workspace industry between them.
GKRE advises landlords and building owners throughout the UK on their flexible workspace options and opportunities to partner with flexible workspace providers.