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Despite the first administrations to hit the sector and the well publicised travails of WeWork, the UK flexible office market continues to grow. In the 12 months to September this year, 35% of all UK office deals involved flexible office operators in some capacity.
Here are the five key trends to watch out for in the sector in 2020. Growth in operators might continue, but growth in the price people are willing to pay for space might not.
More growth but different growth
Instant predicted that the flexible office sector will continue to grow, rising to about 12.5% of all UK office space by 2023 from about 4% today. But operators will need to be agile to capture growing demand: There is more sub-5K SF office space available on the market today than at any time since 2009.
Corporate use will grow
Almost half (45%) of FTSE 100 companies have utilised flexible office space in the past five years, Instant said, and the proportion of flexible office requirements of more than 25 desks has grown each year since the Brexit referendum in 2016, as big companies demand ever-more flexibility.
Trend toward franchising
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IWG, led by CEO Mark Dixon, has leaned on the franchise model as a rapid way to scale the business and maximise the value of IWG’s vast back office operations. The company predicts more companies will follow its lead and use a franchise model to reduce liabilities and increase profits.
Consolidation? Nope, more diversification.
“Many commentators are envisaging consolidation in the market — after the rapid expansion of the last five years — but our data would suggest that this isn’t going to happen over the next 12 months,” Instant said in a report.
It said 83% of flexible office space is operated by small, niche firms, and it does not expect the proportion of space operated by larger players to increase any time soon.
Desk rates decline
Desk rates have declined by 6% in London this year, as greater competition pushes down prices. With competition still intense and the number of operators continuing to grow in London, prices might continue to come down.
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