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Will 2019 Be The Year Of Coworking?

Work.Life's London Fields office

Serviced and flexible workspace was the big story of 2018, claiming a rising share of take-up.

According to data from KWB, the April to June 2018 quarter saw 94K SF let to serviced office operators over five deals, equating to a staggering 55% of total transactions. The overall figure for 2018 is likely to be closer to 20%.

Will 2019 be as strong? Can coworking become mainstream? According to Savills' flexible worspace consultancy Workthere, there are five trends to watch for.

1. Globalisation of providers

Businesses are growing rapidly into new markets and territories and the ability to offer customers multiple global locations can be a powerful selling point and differentiator. Last year we saw The Office Group announce its first European location in Frankfurt, Knotel enter the London market and The Brew tie up with German provider Rent24. Workthere expects more U.S. brands to cross the Atlantic, and more U.K. brands to enter Europe. Also, watch out for Asian providers making a market debut.

2. Growth of niche

Tech and innovation-only coworking spaces such as Huckletree, Techspace and Runway East are already operating in London. The unique occupier mix gives then a unique selling point in a market where workspace is often a commodity. Workhere say they expect more niche providers in fashion, retail and food, and also the growth of women-only spaces.

3. Rise of the coworking landlord

Landlords are moving heavily into coworking: British Land with Storey or Blackstone with Yourspace at Chiswick Park are already in the market, and 2019 will see other landlords join then. Workhere say that the challenge for landlords will be the service and hospitality element. For the providers it is not just about providing a space and collecting rent, they go above and beyond to ensure that businesses thrive in the space they occupy.

4. Consolidation

A crowded market plus lots of entrants equals pricing pressure and, inevitably, consolidation as weaker operators are consumed by the stronger brands.  Deskmag's self-reported data collected in 2017 suggested that 40% of coworking spaces do not make a profit. That number may not be reliable but Workthere said for operators, current pricing is not likely to be sustainable. Providers at risk should pay particular attention to who their core customer base is and what type of space they want. Do not scale the business rapidly, Workhere warn.

5. The hope for transparency

For flexible operators to be taken more seriously as a mainstream market from a valuation and investment perspective, the sector will require more transparency from all providers on occupancy levels and rates achieved. Workhere said they hope operators are up to the challenge.