The expansion of the flexible office sector has continued apace over the last 12 months. Driven by the growing importance of flexibility for both employers and employees, companies have embraced the new working practices enabled by serviced and coworking office space. The offering is no longer limited to small scale start-ups as seen by IBM’s deal to commit to all desks in WeWork’s 88 University Place building in New York City, totalling 70,000 sq ft. The building will effectively become an IBM corporate office, designed and managed by WeWork.
At the same time, many landlords have recognised that securing a flexible workspace provider as a tenant provides a tangible commercial advantage in attracting other tenants to the space, who can make use of the facilities offered. Blackstone’s recent purchase of a controlling stake in The Office Group, and British Land’s launch of its flexible workspace concept, Storey, underlines the importance that has been placed on offering flexibility. Also, providers have started to adapt their business models, with WeWork believed to be in the process of purchasing its first Central London building to be run as a flexible workspace, becoming a landlord itself.
Central London has enjoyed significant investment from the serviced office and coworking sector; we estimate that these providers now occupy around 9.0 m sq ft in Central London, equivalent to 4% of total office stock.
To put this into perspective, this is a similar amount of floorspace to the entire Covent Garden office market.
Over the last five years, Knight Frank’s figures suggest that the sector has acquired more than 4.0 m sq ft; the majority of which has been concentrated in the City Core, which has attracted 30% of the total.
This has been driven to a large extent by the explosive growth of WeWork. Our data shows that the provider has acquired (or is in negotiations on) almost 2.0 m sq ft of office space. We expect that the firm will shortly topple Regus as London’s largest provider of flexible office space.
The growth of coworking is a phenomenon occurring on a global scale. At the end of 2016, the number of coworking individual users worldwide was estimated to have seen a year-on-year increase of 64%. Forecasts suggest that by the end of 2017, the number of worldwide coworking members will have risen by a further 41%.
This is a significant source of new occupational demand across our business, and we will be monitoring the sector closely as it evolves.