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The Flex Conundrum: Where Is The Money Going?

London Office

Flex workspace is here to stay — but is anybody making any money from it? This week the conundrum got a little deeper.

Moves by one of London’s oldest landlords, office offloads by one of its grandest public sector occupiers, and results from one of its biggest flex operators, suggest the answer is: 'not sure'.

The Howard de Walden Estate is a late entrant to the landlord scramble for a flexible workspace offer.

The 300-year-old estate, which owns 92 acres of west central London predominantly around Marylebone, is making its first foray into flexible workspace alongside Spacemade, the flex operator.

The move reflects the growing realisation that the traditional office model is breaking down as companies and individuals look for more flexible options, a statement said. The estate’s latest results show that office rental income fell by 12.2% last year. 

Howard de Walden and Spacemade said they will deliver about 10K SF of new flexible workspace at 34 and 36 Queen Anne Street. The appeal is simple: Spacemade says its flex business model fills locations four times faster than floorspace offered on traditional leases.

The announcement coincided with the disclosure that the BBC would shed office floorspace in response to the trend toward hybrid working.

The state broadcaster plans to leave Wogan House, the approximately 80K SF office building next to its Broadcasting House HQ at London’s Great Portland Street.

The building is owned by abrdn, via Scottish Widows, which acquired it in 2014. The BBC expects to relocate staff to Broadcasting House by spring 2024.

The moves came as IWG, a giant among flex operators, trumpeted 25% year-on-year growth in revenue during Q3.

However, the firm also reported profits likely to be toward the lower end of expectations. Monthly profitability is continuing to grow, and it remains cautiously optimistic about the outlook for the full year, with adjusted EBITDA expected to be towards the lower end of the range of market estimates (£304M-£380M), a statement said. Turnover for the nine months to the end of September 2022 was £2.3B. That said, it is still making money in a difficult economy.

Stock market reaction was cool: IWG’s share price on the London Stock Exchange continued its long slide down, dipping from 131p on the day of the announcement to 128p today.