Offices: more Flex in the cities
CBRE’s recent report UK Landlords & Investors Embrace the Flexible Revolution explored the reaction of the landlord community to the tidal wave of demand for, and provision of, flexible office space in the last three years. In 2018 that surge across UK cities has continued.
Serviced offices, and more recently co-working facilities, have long been a part of the UK office market. However, there has been a marked surge in demand for this type of space in recent years and increased take-up from operators of it. In 2017, take-up from the sector accounted for 18% of overall take-up in the Central London office market. In the wider South East and the large regional office markets like Manchester and Birmingham, take-up from the sector more than doubled in the past year compared with the five-year average.
In the first six months of 2018, the surge of demand for such space in the wider South East and regional office markets has continued. For example:
- In Birmingham there were five major deals to serviced office operators in H1. Regus took 11,560 sq ft at Apex House in Edgbaston, adding to their larger acquisitions elsewhere in the city from 2017. Meanwhile BE, Instant, Orega and iHub all took units in the traditional central business district.
- In Glasgow serviced office operators were prominent in H1 office transactions with Orega taking 21,864 sq ft at 9 George Square, and Regus signing two separate deals at 1 West Regent Street and 100 West George Street.
- Edinburgh has not yet experienced significant take-up from flexible office providers this year so far. However, following the successful opening of the Spaces centre in 2017, other operators are expected to follow suit.
- In Bristol, there has been a notable increase in demand from co-working and serviced office providers. The key deal in H1 was the acquisition of 30,000 sq ft at One Victoria Street by Runway East. There are also two other deals agreed in the city centre and further providers actively searching for space.
- In Manchester a number of flexible office space providers expanded in WeWork acquired 85,000 sq ft in the city centre in two buildings. More recently it has been reported that WeWork are in advanced discussions to set up a third centre.
- In the South East, flexible office providers took nearly 200,000 sq ft (over half of the 2017 total) in seven deals in H1. Slough and Reading town centres accounted for five of those deals.
As our recent survey shows, owners of ‘traditional’ office space accept that the flexible office trend is here to stay, even though it may be in its teenage years. Responses from landlords will depend, amongst other things, on scale of business, experience and expertise, locations and specific assets owned. We find that their eyes are now wide open to both the threats and opportunities posed by growth in the flexible office sector.
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