The march of the flexible workspace is evolving and is set to further penetrate the office market says real estate advisor Cushman & Wakefield, in a new report, Coworking 2019: The UK Flexible Evolution Continues.
Despite political headwinds, flexible workspace operators let more than 1.2 million sq ft of space across 40 transactions in Central London during H1. If letting activity progresses at the same rate for the remainder of 2019, Cushman & Wakefield predicts flexible workspace take-up to exceed two million sq ft for a third successive year.
In the major regional markets, take-up of traditional office space by flexible workspace providers has grown significantly in the last few years. Almost 800,000 sq ft of new space across the major regional markets was acquired by flexible operators in 2017 and 2018, compared to just 100,000 sq ft in 2016. This trend is set to continue, driven by an evolution in both working practices and growth sectors across the UK.
Manchester
In the first six months of 2019, 198,692 sq ft of space in Manchester was let to the flexible office sector, accounting for 24.65% of total take-up. The five-year average reached nearly 280,000 sq ft.
Rob Yates, Head of Office Agency at Cushman & Wakefield in Manchester, said: “The largest transaction of H1 2019 was the acquisition of 125 Deansgate by Spaces, which took the whole building totalling 121,892 sq ft. Other notable transactions included WeWork acquiring Hypen (51,000 sq ft) and Huckletree making its Manchester debut by acquiring 25,800 sq ft in the Express Buildings. Demand from operators with several centres in Manchester and new entrants continues unabated, we expect that take-up from occupiers in this sector will account for a significant proportion of total take-up for 2019.”
Other Regional Cities
In 2018, take-up by flexible workspace operators in Birmingham reached 101,000 sq ft, bringing the five-year total to nearly 316,000 sq ft. Glasgow and Leeds have both attracted flexible workspace take-up in excess of 100,000 sq ft between 2014 and 2018.
Looking ahead, Birmingham, along with Manchester, are likely to continue to cement themselves as the regional flexible workspace hotspots, whilst flexible providers continue to seek new opportunities in potential growth cities across the UK.
The Supply Challenge
The development pipeline of speculative office space in Central London and the majority of the UK’s cities remains particularly thin and could prove to be a barrier to growth at the rate we’ve seen in recent years.
Christopher Dunn, from Cushman & Wakefield’s UK Research & Insight team, said: “Acquiring suitable stock will be a challenge for flexible workspace operators, particularly at a time when off-plan pre-lets are removing space from future supply at a growing pace. However, in those markets where large, quality buildings can be brought to market, the flexible offering is likely to flourish. In markets with very limited space in the pipeline, there are opportunities for commercial developers to lead the market.”
