'The Grown-Up Flex Market': Why Specialist Operators Are Integral To Landlord Strategies

The market for flexible office space across the UK continues to grow. Availability of such space was up 32% in the first quarter compared to a year earlier.

However, operating such workspaces is not a natural activity for many landlords, Orega CEO Alan Pepper said. Increasingly, rather than considering operating such spaces themselves, landlords recognise the value in establishing joint ventures with specialist operators through management agreements. 

“We’ve got to the point where most occupiers have worked out their post-Covid working patterns, so we know what they’re after,” he said. “Generally they’re looking for less space, more flexible terms, more amenities and customer-centric engagement — and most landlords are not set up to deliver that.”

While some larger landlords such as British Land are more operationally engaged in London, most property owners are focused on the financial aspect of property ownership and less able to consider running a flexible workspace, he said.

Orega’s clients range from high net worth individuals who own a single or a few assets to global fund managers. The operator has spaces across the UK in major cities including London, Manchester, Birmingham, Bristol, Glasgow and Aberdeen.

Particularly when a landlord owns multiple properties across regions, managing them itself would be too intensive, he said.

“They are usually deliberately skinny organisations which outsource operations,” he said. “A specialist operator is fundamentally different from a traditional landlord. We’re operationally intensive in the broadest sense, from how we generate leads to digital marketing activity and managing the sales funnel.”

Orega’s teams specialise in all elements of the occupier journey, from a field sales team expert in commercial contracts to facilities management and customer service teams that can manage meeting room bookings, arrange catering and deal with other office administrative activities.

Where landlords do choose to operate their own space, it is easy to get it wrong, Pepper said. For a start, not all space is suitable to be a flexible workspace. 

“There can be a perception that if a landlord can’t let a space conventionally, they will be able to let it as a flexible workspace,” he said. “In reality, the requirements for letting space the traditional way are often even more important for flexible space, and you need to constantly update buildings to maintain their appeal.”

Pepper gave the example of the need for large floor plates that can be divided but still provide lots of natural light, a key occupier requirement. Offices need air conditioning that can be controlled in each office, which can be costly to install, and buildings need to be located near transport hubs. 

Landlords can also overlook the effort required for sales and marketing, Pepper said. The operator needs to communicate to a much wider pool of potential occupiers about a much wider range of potential options, not only focusing on the building amenities but also the flexibility on offer. 

Orega establishes management agreements that are predicated on working with landlords on a joint venture basis to activate their space, Pepper said. The two parties are therefore both incentivised to make the building successful.

“Before Covid, a landlord would have looked at you slightly glazed if you talked about management agreements, but now it’s on everyone’s radar,” he said. “Now, it’s a way for them to gain more income out of the space.”

Before the pandemic arrived, management agreements accounted for only 9% of flexible workspace deals, and most operators took traditional leases instead. By 2024, this had risen to 41%.

Orega funds part of the initial investment in the space, paying for the elements of the fit-out that can be moved, such as furniture and artwork. 

“We don’t want to bother the landlord about furniture that we need to change regularly,” he said. “Our agreements are structured to be as simple and transparent with landlords as possible, with as much certainty around the cost of operations as we can give.”

Increasingly, property owners are bringing a flexible operator into a refurbishment or development from the beginning, as part of their multilet strategy, Pepper said. In many cases, the flexible space can be a feeder for areas of a building that are aimed toward traditional leases. 

Many corporate occupiers are drawn to Orega’s spaces due to the options to expand into other workspaces or even cities within the same network, Pepper said. Orega has 26 workspaces across the UK and more than 10,000 users.

“We build communities within our sites and networks across our buildings,” he said. “Increasingly, businesses take multiple locations around the country. If a landlord owns buildings in several cities, we have a steady stream of occupiers to introduce to them.”

Orega has built its network of spaces over the last 20 years. Its success is clear both in the popularity of spaces, such as Lime Street, which was fully let within nine months, and occupiers’ average contract length, Pepper said.

Across the flexible market, occupiers’ time in the same flexible space has increased — the average contract length in the first half was 22 months, an increase over the last five years. But Orega’s average length of stay is more than three years, Pepper said.

He attributed this partly to how Orega’s spaces are geared toward corporate businesses that now make flexible space an established part of their occupation strategies. The company has many occupiers in the legal and financial services industries, he said, not just to house project teams but to accommodate permanent teams. 

“Once organisations are settled in and have good rapport with our team, they don’t really need or want to move,” he said. “The high level of amenities we provide are part of their plan to boost workplace attendance. What’s key is we can support their growth.”

While flexible office space has been around for a long time, the flight to quality is only going to increase, Pepper said. Corporates increasingly want someone else to deal with building management, as well as an environment that encourages their employees to come into the office.

“This is the grown-up flex market, and both landlords and corporate occupiers recognise it,” he said. “The reality is that the requirement for flexibility is only going to increase.” 

Pepper will be discussing office amenities and services at Bisnow's UK Office Conference Series: Leasing Trends and Occupier Demands on 7 October.

This article was produced in collaboration between Orega and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.