Why You Need To Get Seriously Excited About Birmingham's Flexible Office Boom

WeWork is "storyboarding" its plans for a Birmingham debut, with anything between 60K SF and 250K SF in view.

Meanwhile a clutch of other coworking disruptors are preparing a potential extra 250K SF, Bisnow has been told.

All this in a flexible office market that is enjoying "meteoric" growth, according to LSH. Is now the time to drop the Brummie reserve and get seriously excited about serviced offices?

The laconic Birmingham temperament does not encourage outbursts of emotion. But even by the city's standards, the Midlands' office market's response to the seisimic shifts in its flexible office sector have been low-key.

A series of analyses (LSH's being the most recent) suggest serviced offices account for one in ever five square feet of floorspace let, a vastly higher proportion than in Manchester or other regional centres. Yet the razzle-dazzle that has accompanied the flexible office surge elsewhere in the U.K. is just missing.

"Serviced has been the most active office sector in last year, admitedly not yet on the scale of London or Manchester, but growing very fast, and the trend is going to continue. People need to recognise that," Bruntwood Sales Director Andrew Butterworth said of the office market's toned-down feel.

Bruntwood is responding by rethinking the way they build communities in their Birmingham office flagship, the 110K SF Cornerblock, and preparing to meet the coworking competition head on. "Birmingham is significantly underserved in this sector, compared to London and Manchester, and there are a lot of reasons why the trend to coworking and serviced offices will continue," he said.

If others in the city office market are not, yet, as excited as he is, that may be because the design-led big beasts of coworking like WeWork have yet to make their appearance in Birmingham.

"So far serviced sector growth has been largely among the traditional operators. The new wave like Office Group and Work.Life are looking, but haven't yet moved. Maybe when we see more of their more design-led offer it will whet the market's appetite for more," Butterworth said.

The story might be a little more complicated than that, hints CBRE Birmingham director Theo Holmes. If he is right the slightly low market temperature might suit some of WeWork's rivals rather well and this, rather than natural Brummie restraint, might explain the unfizzy atmosphere.

Rivals Locking Out WeWork?

So consider this possibility. You are a big player in the flexible office sector in Birmingham and you would like it to stay that way. Knowing that disruptors like WeWork are on their way you decide to step up your own provision to make sure you retain market share. The move might also deter new arrivals who will face competitors who enjoy an enormous head start.

This is the scenario painted by Holmes, who says WeWork may be taking this possibility into account in their current Birmingham search.

"WeWork are storyboarding the Birmingham opportunities now, which for you and I means preparing a business plan, and they are looking at the demographics and market share and doing their sums," Holmes said.

"There is definitely floorspace in Birmingham that would suit them, and I guess the question is whether this is an appropriate time to be doing it, because there's been such high take-up of serviced office space in 2017 and 2018 that they might  wonder if the other operators are trying to lock WeWork out of the market so that it will think the Birmingham market is already totally covered."

Holmes says WeWork is unlikely to be deterred because they want to be seen as a U.K.-wide proposition. "They may take the view they will simply go in anyway, because it is an opportunity to grow to size, to scale, which they have to bearing in mind their set up costs. The minimum debut for them has to be 60K SF, and ideally they would want to ground into six figures, in multiple buildings, perhaps up as far as 250K SF," Holmes said.

In the meantime Holmes estimates that another half dozen coworking-led operators are looking at 20K SF to 50K SF each. And when they arrive, and start to disrupt, the Birmingham office market will pay rapt attention.

The Battle Begins

Holmes speaks for many when he says that, for now, the traditional small suite office market is not under threat from flexible office or coworking operators. "Today it is still cheaper to put 10 people in a Birmingham office with a traditional lease than it is to buy serviced space, but of course traditional space does not come with the flexibility and landlords are responding, often with turn-key solutions," he said.

Others have responded by hedging into the serviced sector and are reaping the rewards. Birmingham’s newest coworking space, at The Colmore Building, AshbyCapital’s 14-storey office building in the city centre, has seen exceptional levels of demand, with average daily occupancy in its business lounge hitting 73% within the first four weeks of opening.

AshbyCapital has worked with Orega, which also operates 17K SF of serviced office space on The Colmore Building’s mezzanine floor, to create a new ground-floor coworking area, as well as a further 11K SF of serviced office space.

“We don’t see flexible workspace as a threat to traditional office space; in fact, we find it complementary. A good coworking space within a building provides an additional amenity to other tenants by giving the option of overflow space and additional meeting rooms," AshbyCapital Chief Executive Peter Ferrari said.

“When you look at high-quality coworking space as a proportion of overall commercial space in Birmingham and compare it to London, I would say there is still a long way to go before the flexible office market in the U.K.’s second city hits its peak."

“Birmingham is one of the youngest cities in Europe, with almost 40% of its population being under 25, and research from Instant Offices found that it is the U.K.’s most entrepreneurial city, with nearly 22,000 companies launched in 2017. Both of these factors support the rise of coworking," Ferrari said.

"Birmingham is an entrepreneurial city, a place all about startups of a kind that will prosper in coworking. Today they are less interested in going into a cubicle, which is less inspirational, and with less chance of interactions with others. So when coworking arrives in force in Birmingham it will be fantastic," Holmes said.

You could put this another way and say there is plenty of demand to fight over, and an increasingly large pool of people prepared to fight for it. And the spark that will ignite the battle is likely to be the arrival of WeWork.

If you weren't already excited about serviced offices in Birmingham, then you will be very soon.