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With low barriers to entry that have led to rapid growth in recent years, coworking and flexible office space are one of the few areas of London where there are worries about oversupply.
But a new report and index from Cushman & Wakefield said there is still room for growth in London coworking, due to the combination of the city’s business environment and the way its office market works.
Cushman said London came out top in an index measuring the potential for growth in European coworking space, ahead of Paris, Stockholm and Dublin.
The index measured four areas: the scale of the existing office market; the business environment, including office lease lengths; the type of people and companies that work in the city; and catalysts like venture capital funding and research and development going on in a city.
London scored well because it has a large existing office stock, but the average lease length is the highest in Europe, meaning it is difficult for companies to find the flexibility they crave from traditional offices.
While cities like Stockholm and Copenhagen have a higher proportion of technology and knowledge-based firms, London benefits from having a huge proportion of Europe’s VC funding.
Overall London has more than 11M SF of flexible office space, second globally to New York. Last year 16% of London office leasing deals were for flexible offices, down from 21% the year before.
“We expect the demand for coworking to be strong in these markets and would recommend a proactive strategy — both on behalf of coworking operators and office landlords — to manage their response,” Cushman said in the report.
In spite of the sharp increase in supply of flexible workspace, there is more than enough demand to match this, if one key piece of evidence is taken into account — the average price of flexible workspace is still rising, Instant Offices said in another report. The average desk rate rose 17% to £690 in 2017, the last year for which data is available.
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