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4 Trends Set To Impact The Flexible Workspace Industry In 2019

by Jo Meunier
December 21, 2018
in Business
Reading Time: 4 mins read
A A
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Although the industry has secured a favourable position in the long term, as consolidation increases the time is coming when we will begin to see real winners and losers

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  • UK flexible workspace agency Workthere sets out 4 major trends for the year ahead.
  • Globalisation of providers and consolidation will lead to “winners and losers”.
  • Despite questions over sustainability, the industry has secured a favourable position in the long term.

In 2018 the UK flexible workspace market expanded, diversified, and thrived. In Central London, flexible workspace operators absorbed around 4% of Central London office stock (10.7 million sq ft), according to Cushman & Wakefield, which is 2.7 times more than 2007. What’s particularly noteworthy is that most of this growth occurred in the last five years.

Can we expect the same level of growth in 2019? Or will consolidation combined with external factors – such as Brexit – hamper performance?

According to Workthere, the flexible office brokerage backed by Savills, the popularity of the sector is expected to intensify as it continues to diversify and draw international interest.

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Cal Lee, global head of Workthere, believes that this growth will come from an emerging band of occupiers who are seeking a service-led, experiential workplace with a focus on flexibility and wellbeing, which is of “paramount importance” to clients.

That said, the sector’s growth cannot continue on its current trajectory forever.

“This year there has been particular question marks over the sustainability of the serviced office sector due to its somewhat rapid renaissance over the last five years,” Lee commented. “However, the flexible office market continues to go from strength to strength and its irreversible impact on the overall workspace has secured its position in the long term.”

2019 Flexible Workspace Trends

With that in mind, Workthere reveals 4 major trends that are expected to impact the flexible workspace sector over the next 12 months:

1. Globalisation of providers

The ability to offer customers multi-global locations and networked buying power can be a powerful selling point, and a major differentiator. This is becoming increasingly important as operators seek to future-proof their brand in a competitive – and growing – market.

As such, flexible workspace companies are scaling to new markets and territories. Among them, The Office Group announced its first European location in Frankfurt, Knotel entered the London mark and German provider Rent24 made its UK debut by acquiring London-based The Brew.

“We expect more and more providers to expand their business into new territories in 2019. In particular it is likely we will see: more US names entering Europe; UK brands establishing a presence in key European cities such as Dublin, Berlin, Frankfurt and Paris, and the US and more Asian providers coming in to Europe and the US.”

2. Growth of niche

2018 has seen a surge in niche spaces, such as tech startup spaces (Techspace, Runway East) and female-oriented spaces (Blooms London). While niche spaces fulfil a very specific local need, they also help the operator to differentiate and develop a powerful brand that aligns closely with their clients’ core needs.

“We expect more new providers to focus on niche in an effort to differentiate themselves. In addition, there has been an emergence of spaces offering a niche facility as a means to attracting clients. The big trend we expect in 2019 is the growth of the on-site crèche or nursery for parents to work whilst their children are looked after.”

This service is already provided by trailblazers Third Door and Cuckooz Nest, and Workthere expects this to continue in 2019, especially as flexible workspace moves into residential areas.

3. Rise of the coworking landlord

Real estate landlords are incorporating flexible space into their portfolios in a variety of ways. But as Workthere points out, only a handful actually operate their own space, such as British Land with Storey and Blackstone with Yourspace at Chiswick Park.

“We anticipate that 2019 will see a surge in the number of landlords delivering their own flexible office product as part of a wider office scheme, as they seek to compete with the coworking market as tenants continue to seek flexibility and service.”

4. Consolidation

While rocketing growth has created many successful brands and cemented flexible workspace as a viable long-term option for business occupiers of all sizes, there is an inevitable downside.

“There has been an inevitable growth in competition on pricing, particularly in London, and we expect to see some winners and losers with a rise in consolidation between providers.”

Indeed, Cushman & Wakefield’s report (May 2018) found that around 1.5 million sq ft of space has ceased to operate over the last 10 years. One of the most recent casualties is Rainmaking Loft, which closed its coworking space in St. Katharine Docks after WeWork leased space within the same building.

Workthere notes that providers who may be at risk should pay particular attention to understanding who their core customer base is and what type of space they want. “Often we see providers seeking to scale too quickly or develop a product that doesn’t meet their market demands and this is when they can come into trouble.”

Looking ahead, the UK market will be under close scrutiny as the nation continues to navigate Brexit, with its current ‘exit’ date of 29th March 2019. Whether it helps or hinders our industry in the long-term remains to be seen, but for now, it is having the positive effect of driving more businesses into flexible space while large decisions are withheld.

All things considered, with projections for consolidation, ‘nichification’, diversification and yet more growth, 2019 is shaping up to be another action-packed year in flexible workspace.

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Jo Meunier

Jo Meunier

Jo is Allwork.Space's Senior Editor for the UK and Europe. Jo has worked within business centre and coworking circles since 2009, researching and contributing written features for numerous industry publications. She reports on the latest market news and delves into local issues with one main objective: to champion the flexible workspace industry and its members.

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