Adapting to a Flexible Office Market in London for Landlords

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The flexible office environment is a development that has been on the rise over the past few years, creating the perfect blend of office and ancillary space in the workplace.

In January 2019 these spaces represented 5.1% of London office stock, totalling 11.5 million sq ft. These flexible spaces are starting to appear all over the UK, offering opportunities for start-ups and small businesses and alternatives to long-term leases.

According to JLL, the market is split into three different types of flexible space users:

Conservative

Little experience of flexible space with a limited plan for expansion.
Experimental

Little to moderate experience of flexible space with a plan to grow 10+% in the next 3-5 years.
Visionary

Significant usage of flexible space with serious and ambitious plans to expand.

Opportunities for tenants

Typically, these flexible spaces offer shorter leases that are less than five years, providing a stronger ability for landlords to retain their tenants as they grow and contract. This is especially appealing to newer and smaller businesses with unexpected growth rates that cannot commit to longer leases. Larger multi-national organisations are also displaying an increasing interest in these spaces as they look for outlets to aid their need to expand or reduce numbers in their offices to accommodate their workload.

With flexible office space on the brink of becoming mainstream there is pressure on landlords to find a niche that can separate them from the crowd. The coworking sector of the flexible market is undoubtedly the largest and a recent introduction of female-only spaces is set to spark a rise of more facilities that focus on niches. In 2019, the most important trend for landlords to focus on is providing an onsite crèche or nursery, allowing parents to find the perfect work-life balance.

Challenges for landlords

According to CBRE, the biggest challenges for landlords opening their own flexible office space are:

• Lack of experience in running a flexible space
• Disruption to existing cash flows, valuations and asset liquidity
• Competition from other landlords/flexible space operators
• Not having the right type of space

To combat these barriers landlords should look at working on the quality of the space provided, with enhanced technology to appease customer demands. Supplying short-term leases that can be signed within days as opposed to months and securing space that is ready for action with fitted WiFi and other amenities.

London and other large cities are predicted to be the most popular sites for these facilities, as companies seek to expand quickly to nearby central locations. By 2030 flexible office space is set to account for 30% of portfolios held by corporations, which means the race really is on to develop the best quality flexible office space.

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