Rise of Flexible Office Space 18th January 2016

The UK has witnessed a 51 per cent increase in the number of firms over the past five years, and in 2016 this growth seems set to continue.

These new businesses, the vast majority of which are small and medium-sized enterprises, need somewhere to work, develop and grow.

As a result, demand for desk space in serviced offices, flexible office space and co-working space has soared in recent years. Research carried out by Deloitte found that the number of providers of serviced office space rose by 25 per cent in 2014, and BCA research shows that the serviced office sector contributes around £2bn to the UK economy per annum.

Although London saw the most significant growth of more than two-thirds, regional cities such as Manchester, Bristol, Cambridge, Belfast and Glasgow all increased their serviced office provision.

Even areas that have often been neglected have seen growth. Coventry and Derby, for example, increased serviced office provision by more than 50%. The serviced office sector now operates in space across the UK equivalent to all the commercial space in the City of London.

Perhaps most interestingly, during 2015 enquiries for flexible office space rose by 21% across the UK whilst enquiries for non-flexible space only rose by 15%, according to a recent feature in Property Week. Not only does this support the notion that serviced offices are in increasing demand, but suggests that many firms would rather use flexible serviced office space than take on longer-term leases.

The flexible office space sector is therefore challenging the traditional office model of large floor space and long-term lets. In 2016 traditional office providers may even move into the serviced office model. Regus, amongst others, have been exploiting this demand – they opened 60 new business centres in 2015, and look set to continue this growth in 2016.

Part of the success of serviced offices has been the sector’s ability to adapt – to both new patterns of working and different economic realities.

New operators continue to emerge and bring unique and innovative solutions to the market. This continues to create a more competitive environment which will benefit customers and operators. For example WeWork, the successful American provider of flexible work space, understood the growth of the UK market and opened a number of high-profile spaces in London.

Operators now create vibrant workplaces, opportunities to network and socialise, shared facilities, attractive buildings, and the ability for users to be flexible in their work patterns. For example, The Office Group took charge of 33,600 sq ft of space in the Shard – this has given small firms an opportunity to work from a building that might previously have been reserved only for FTSE 250 companies.

Small businesses themselves have helped to drive this change by demanding flexible office space and interesting environments in which to work and network. In part this has also been influenced by the unique approach to office space from some of the largest global firms, including Google and Facebook who value a flexible, stimulating environment.

Although serviced, managed and co-working space is becoming a much more attractive and stable prospect for investors, there are still challenges. Permitted Development Rights, for example, will continue to increase the costs of office space in prime locations, for both operators and customers. This may result in smaller or independent operators being priced out, particularly in the co-working sector.

Nevertheless, the UK’s serviced office sector has responded to the new demands of business and helped create buzzing workspace environments. Growth in the sector looks set to continue, and not just in the traditional markets of London and the Midlands, but across the UK – becoming more diverse and varied in the process. As business creation looks set to remain high, and with enquiries for serviced office space now outstripping traditional leases, 2016 can be the year of the serviced office.