Cautious Optimism As Instant Releases Its 2020 UK Review

Published on November 5, 2020 - By Jo Meunier (née Disney)

• The Instant Group has released its 2020 UK Flex Market Review.
• The report reveals that UK supply has grown 4% despite the impact of Covid-19.
• While challenges persist, the report highlights a number of opportunities — including flex operators becoming “part of the supply chain” for newly agile businesses.

The Instant Group’s 2020 UK Flex Market Review landed this week. And in a year that has flipped every expectation on its head, the report makes interesting reading.

The top headline is that the supply of flexible workspace across the UK grew by 4% this year, despite the rapid onslaught of Covid-19.

And while work from home orders and global lockdowns led a number of analysts to prematurely write off the office as doomed, Instant reported that 30% of flexible providers reported stable occupancy rates throughout the global lockdown.

Instant’s research also shows a rise in demand within the smaller, regional markets, with market towns and city outskirts driving deals.

This comes as many companies look to decentralise their workforce and make use of regional workplace networks to reduce travel into congested city centres and allow employees to work near home, rather than work at home full-time.

Top takeaways:

• Supply has continued to grow: The UK flex market supply has continued to grow in 2020 by 4%. Before Covid-19 hit, supply had grown 11% in 2019. However despite difficult conditions, “all the top markets in the UK have continued their growth over the past 12 months”.
• Only “deep pockets” are driving growth: The growth in supply is coming from larger operators who see long-term opportunity in the market, while smaller providers have been severely impacted by the situation. “Without the deep pockets of a large financial backer, this is a very difficult time to move forward”.
• Rates are dropping: Demand in London and UK cities has dropped 36%, which is “driving a buyers’ market”. Consequently, average rates across the UK have decreased by 5%.
• IWG has competition: While IWG Plc still holds the biggest percentage of the market, other fast-growing operators are sneaking up. These include Kitt, Oxford Innovation and The Office Group.
• Occupancy is weathering the storm: During the lockdown, occupancy across the UK fell by just 10%, which was much less than anticipated, while occupancy rates in certain suburban markets have increased.
• ‘Wait and see’ mood is hampering deals: Despite rocketing Internet search levels and growing enquiries, this has yet to translate into “significant market activity”. Instead, there is a prevailing ‘wait and see’ mood, which is preventing significant deals from larger occupiers.
• Flexibility is No.1 priority: 24% of occupiers cite ‘flexibility’ as their top requirement, followed by 17% requesting a Covid-19 plan (effective cleaning rotas, etc) and 13% wanting ‘great value’. Subsequent priorities focused on amenities, including parking (9%) and ultra-fast Internet (7%). At this time, only 2% are prioritising meeting rooms.

Of course there are tough times ahead, especially as the extended UK lockdown is putting further pressure on flexible workspace operators.

Yet while the immediate future remains uncertain, the message from Instant’s research is clear. The future is not about filling space, but about providing a service and a place that people want to return to. This is not the end of a particular model, or location, but an evolution — and operators now have the opportunity to create more choice for their occupiers, and to be “viewed on equal terms” as part of a supply chain to develop their clients’ new, agile approach to business planning and workplace strategy.

John Duckworth Head of UK and EMEA at the Instant Group, commented: “The flex industry has experienced a dual impact – on the one hand, the pandemic exposed weaknesses in some of its operating models but the future of the office market looks to be considerably more agile, which will ultimately play to its strengths.

“Whilst the remainder of the pandemic period requires nerves of steel, the recovery phase will see significant opportunities as the sector’s relevance in terms of corporate recovery and strategic portfolio solutions come to the fore.”

Read the report in full here