- A new report from Colliers International shows that both the flexible and conventional office markets in London are performing strongly.
- At the same time the conventional market is changing as occupiers reduce their office footprint, leading to ‘spatial diversity’.
- The climate has changed in 2019, with landlords less reliant upon flexible workspace growth to fill office buildings.
Vigorous. Robust. Reassuring.
These are just some of the adjectives used to describe the London office market in Colliers International’s latest report. This comes despite ongoing political uncertainty in the UK, including a newly elected Prime Minister, Brexit, and the possibility of leaving the EU without any concrete arrangements for the future.
As we know, uncertainty often plays into the hands of the flexible office market. Instant’s latest report found that London’s supply of flexible workspace has grown 17% over the last 12 months, and the city’s growth forecast remains “healthy”.
Similarly, the conventional office market is also enjoying positive take-up.
According to Colliers’ latest report ‘An Absorbing Picture: London’s Changing Occupier Frontline’ (July 2019), the capital saw above average demand for conventional office space in 2018, driven largely by expanding corporate occupiers.
Colliers also found that key business sectors are reducing their overall office footprint, despite jobs growth and a high level of employment, and refers to this ‘spatial diversity’ as evidence that “flexible office providers are increasingly eating into conventional market share, making occupiers more footloose than ever before.”
Landlords “starting to resist” Flexible Space
However, while Colliers notes that the conventional market is changing, it’s not necessarily to make way for more flexible office space.
The research has revealed “overwhelmingly positive” letting activity in the conventional office market, despite Brexit uncertainty. Colliers notes that landlords have been buoyed by this performance and, despite high demand from flexible office operators, are pushing back in favour of longer-term leases:
“The serviced offices sector has been a major contributor to transaction levels over the past three full calendar years … Indeed, the perceived wisdom, that Landlords, now encouraged by a sharp improvement in demand from conventional office occupiers, are resisting overtures from flex providers, seems to be backed up by 2019 figures to date. The West End market saw exceptional demand from flexible office providers in 2018, as competition for market share drove activity. The climate has changed in 2019 though, with landlords and developers less reliant upon flexible growth to fill up office buildings and thus starting to resist approaches from the serviced offices sector.”
However, while London’s core markets such as the West End and City have become highly competitive for flexible space operators seeking new locations – to the point where some established operators have stopped considering these areas – other outlying markets are increasingly falling under the spotlight.
So what is happening? If, as Colliers revealed, occupiers are reducing their office space footprint yet activity remains high (and even “vigorous”) for both the conventional and flexible office sectors, what does this mean?
According to the report, this ‘spatial revisionism’ is being undertaken by many of London’s major firms, who are in the process of reviewing working practices and, consequently, physical footprints and office configurations.
It’s a process of workplace modernisation which affects all sectors, although Colliers notes that it is particularly prevalent in ‘traditional’ sectors – including the legal, insurance and banking sectors – who, far from being resistant to change, are “seeing the greatest impact by developing new procedures, operational environments and collaborative working practices.”
In short, it’s a push for greater flexibility, collaboration and agility in the workplace. Flexible space comes in many forms, and the research shows that all sectors are embracing flexible working to some degree, which is “contributing to irrevocable workplace change”.