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Flexible Space Operators Quick To Identify New London Hotspots, Says Savills

by Allwork.Space - Press
December 11, 2017
in Press
Reading Time: 3 mins read
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A surge in venture capital investment in parts of London, including the South Bank area, is leading to high demand for flexible space -- and workspace operators are responding.

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  • Research from Savills and Workthere suggests that serviced office operators have been quick to react to new demand in specific parts of London.
  • In 2017, take-up by flexible space operators in London’s South Bank and Midtown has increased 133% and 104% respectively, compared to 2016.
  • The demand is largely attributed to a “substantial rise in venture capital (VC) investment” in these areas.

According to company data analysed by Workthere, venture capitalist (VC) investment into start-up companies located in London to the end of Q3 2017, is already 8.6% ahead of the £2.6 billion recorded for the whole of 2016.

Interestingly, Workthere notes that start-ups in the south bank and midtown, which are not generally recognised as core markets for these businesses, have seen a substantial rise in VC investment, with the number of deals transacted in these areas during 2017 expected to represent an average year-on-year increase of 105% and 81% respectively, since 2013.

These growth rates are similar to those seen in the traditional core markets such as Shoreditch and the city core, with the number of VC investment deals into start-ups transacted in each of these locations expected to have risen on average year-on-year since 2013 by 107% and 93%, respectively, at the end of 2017, according to the company data analysed.

In line with the increased VC interest, serviced office providers have also identified an opportunity in the south bank and midtown in terms of targeting the start-up community, having accounted for 314,695 sq ft and 158,019 sq ft of take-up respectively at the end of Q3 2017.

According to Savills research, this reflects an increase of 133% for the south bank and 104% in midtown when compared to take-up by these occupiers during the whole of 2016.

The firm notes that take-up by serviced office providers in the south bank to the end of Q317 is of particular note as it is just below that recorded during the same time period in Shoreditch (316,371 sq ft), and significantly above the city core (133,672 sq ft), both of which are areas that have traditionally been the main start-up clusters in London. A prime example of this is WeWork signing up for 280,000 sq ft at Two Southbank Place.

Cal Lee, head of Workthere, comments: “The strong level of VC investment into start-up companies across London is a positive and encouraging sign and demonstrates the strength of the capital as a leading location for these businesses, despite the uncertainty surrounding Brexit.

“The fact that there has also been a significant rise in VC start-up investment deals away from the traditional hubs of Shoreditch and the city core in locations such as the south bank and midtown, further underlines London’s growing strength.

“In addition, alongside Savills, we have identified a direct correlation between the rise in VC investment and increased take-up by serviced office providers, particularly in these less established start-up locations. This is a trend that we expect to feed out into other sub markets that are not as populated with serviced office space, such as North Oxford Street East, Clerkenwell and Farringdon, as the demand for flexible space to compliment growing businesses continue.”

With regards to rental tone for serviced office space in these London sub markets, Workthere reports that both south bank and midtown are currently competitively priced at approximately £650 per desk / per month, while Shoreditch and the city core are estimated at £700 and £750 per desk / per month.

Steve Lang, Savills research team director, adds: “The London sub markets currently offer a strong alternative for new businesses and start-ups looking for short-term flexible and serviced office space as they establish their business in the market. We expect these communities to continue to expand across the capital as demand for this type of space grows as a result of VC funding.”

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