The latest research from The Instant Group has found that in September, average occupancy rates for flexible workspaces across the UK rose to 80%, the highest seen since the pandemic began.
Key findings from the research include:
- Flexible workspace vacancy rates have already dropped to pre-pandemic levels based
- 85% of available supply caters for small- to mid-sized requirements – between 1 and 25 workstations. 13% represents space for 25-100 workstations. Just 2% caters for those looking for 100+ workspaces
- Rising occupancy rates is impacting pricing in key markets – average rates across London have seen a 5% incline since Q1 2021
- High vacancy rates within traditional office buildings present an opportunity for flex operators to expand or enter new markets, resulting in a greater choice for the customer
- Space utilisation within flexible workspaces is currently 20-40% lower than contractual occupancy
There are increased signs of the UK flex market returning to some degree of normality. Business confidence is returning, but the desire from corporate organisations for ongoing flexibility and agility remains high. This is being seen as a positive sign for the future of the flex industry across the UK and is a strong indicator that many companies see flexible workspaces as a key part of their return-to-work strategy.
A NARROW WINDOW OF OPPORTUNITY
Larger companies are increasingly driving demand for flex workspace, whether that be for head offices, satellite offices or local drop-in spaces. The ability to adapt at speed is now a key priority for larger businesses, and this extends to their real estate portfolios. One of the stumbling blocks to companies acquiring large spaces in the flexible market is the lack of availability of larger floor plates.
Despite rising availability during the pandemic, there is still a limited supply of offices with 25-100 workstations, while office space for 100+ workstations is even more scarce, with just 2% of current available stock accommodating this size of requirement.
Operators are starting to respond to the growing demand for larger spaces and some have announced plans to expand their portfolios, however, it will take some time for these new spaces to be available in the market.
INVESTMENT FOCUS OUTSIDE THE CAPITAL
Instant’s research shows that the availability of larger spaces is becoming very limited. If flexible workspace is to become a viable corporate solution, more significant investment is needed outside of London is needed to make it a viable option for them. Larger spaces are in short supply so corporate occupiers need to move quickly, particularly if they are looking outside of London, where just 15% of available offices can accommodate requirements of 25+ people.
FLEX VS TRADITIONAL OFFICES – HOW HAVE THEY WEATHERED THE STORM?
Despite many believing that London offices would stand empty for some time, vacancy rates for flexible office space in central London have already dropped back to pre-pandemic levels. Traditional offices, on the other hand, are still a way off from a full recovery and, due to their longer lease terms, some companies may not have yet had the chance to exit their contracts.
The flex market sees high vacancy rates within traditional office buildings as an exciting opportunity for existing flexible workspace operators and landlords to expand, or for new players to enter the market in areas where a lack of space has previously restricted growth. Landlords with empty space are being spurred to follow demand and create their own flexible workspace arm or partner with an existing flexible workspace provider.
Lucinda Pullinger, Managing Director UK, The Instant Group, said: “The strength of the flexible workspace market is becoming apparent as organisations drive for agility within their real estate portfolios. Providing exceptional workspaces for their employees has become a key focus for heads of business, and flexible workspaces facilitate this without the need for long term commitments, allowing businesses to test and evolve.
“This is a time of growth for the flexible workspace sector. Existing flexible providers will need to turn their focus to investment in larger spaces, particularly outside London. It also opens an opportunity for traditional landlords who are facing continued high vacancy rates in their spaces. As more corporate companies put value on agility, diversification in supply will present occupiers with more choice and more solutions, enabling them to find the right solution for their business.”