We’ve all seen the headlines. Co-working is becoming the new norm in the office market as the shift towards flexible working helps to turn the traditional operator model on its head.
Figures from earlier this year show that London remains the global capital for co-working spaces, but it is certainly not the only UK city seeing a boom. Across the UK’s largest regional cities, take-up jumped from 2 per cent to 7.5 per cent of all leases in 2017 as the growth of companies including WeWork, Uncommon and Spaces fuelled record increases. One recent report claims flexible working spaces are set to grow by up to 30 per cent annually for the next five years across Europe.
WeWork is perhaps the biggest success story to come out of this trend, but it is by no means the only one. The US start-up, now valued at $20bn, began by targeting entrepreneurs and fellow start-ups, but more than a fifth of its tenants now have 1,000 or more global employees.
Its growth is unprecedented. WeWork launched in the UK in 2014 and by the start of 2018 it had 20 locations accommodating 26,000 tenants. It is now the largest private office occupier in both London and New York. In recent times though, there has been a softening in WeWork’s dominance, with two deals being refused due to perceived covenant strength.
So what does all this mean for office landlords? And how can they capitalise?
Satisfying an evolving market
Ultimately, this shift is about reacting to changes in occupier demands. The growth of flexible working, a spike in entrepreneurialism and collaborative businesses, as well as the trend for ‘incubator hubs’ have all contributed as landlords and operators place a greater emphasis on Cat B fit outs in order to create their own co-working spaces.
The key is to share the occupier mindset of ‘property as a service’, not the long-term commitment it once was. Today’s office space must appeal to a changing, more dynamic market instead of simply satisfying the conventional demands of large occupiers. Businesses now want the option to move in and out quickly with greater demand for short-term leases that afford them this flexibility – though in reality, figures show that few do move out once they find the right location.
Many have noted the similarities with the residential property sector, not least through this availability of flexible leases, but there is a more obvious comparison to be made too – interior design.
Taking the lead from the residential property market, landlords are increasingly turning to consumer-led design within their Cat B fit out in a bid to attract the young, creative businesses in particular that are fuelling the growth in co-working.
Whether offering a choice of ‘vanilla’ designs or giving occupiers the option to choose off-plan from a series of standard designs, it is very similar to the conversations that will be happening in sales offices of residential developments up and down the country. The end result is usually a fully-furnished, functioning office within a wider co-working space, offered to the exact specification requested.
A new wave of working spaces
With no sign of the co-working trend letting up, this is a quantum shift in the office market and one that landlords and operators simply can’t afford to ignore.
From my experience, I’ve noticed a huge move towards flexible working spaces and the ideologies of residential property being brought into a commercial environment. Occupiers want to be in a space that not only allows for a more flexible way of working, but also can improve other aspects, such as wellbeing and having quality on-site facilities.
We’ve recently worked on a flexible co-working space for Uncommon on Liverpool Street, London, revamping a 41,000 sq ft office space to include new showers, a coffee shop, a lounge area and an auditorium. The whole facility provides a combination of flexible offices and co-working desks on a leased or membership basis.
We’ve also recently provided a number of fully fitted out ‘plug and play’ suites for a landlord looking to rejuvenate the lettings strategy in a large multi let property. With large corporates expecting co-working to form part of their property toolkit in the future, landlords need to continue to react to demand.