The latest research from JLL, Disruption or distraction, where next for the UK flex market sector, claims that the real revolution of flexible office space lies in the variety of solutions now on offer and that the market has seen more changes over the last three years than the previous 30 combined as it continues to grow and evolve. JLL’s research claims that over the next five years more than 10m sq ft will be added to the stock in the key UK cities and flex space will account for over 8.5 percent of the total office stock by 2023.
JLL’s research suggests that the flexible office market in the UK grew by 25 percent in 2018, a similar rate to 2017, and whilst London dominated the sector both Birmingham and Manchester each saw more than 100,000 sq ft added to their flex stock in 2018 – which has already been followed in 2019 by 55,100 sq ft and 147,000 sq ft of lettings respectively.
Whilst the regional UK cities remain some way behind London in terms of the impact of the flexible office sector, the Big 6 cities (Birmingham, Bristol, Edinburgh, Glasgow, Leeds, Manchester) have seen strong activity over recent years from operators. Take-up rose 26 percent between 2017 and 2018 to reach 584,000 sq ft, representing 10 percent of overall transactions. JLL highlighted that the pattern of the take-up in the Big 6 is following a similar trajectory to Central London but lags around three years behind. All are expected to see continued growth and it is anticipated that by 2023 flex space will account for an average of 5 percent of stock.
UK wide take off
Elaine Rossall, head of UK offices research at JLL, said: “Activity in the Big 6 will take off in the next few years, particularly with WeWork who was instrumental in driving the expansion of Central London, now entering the regional markets. Manchester is presently the most mature of the regional cities, not only was it the first location outside of London to secure WeWork, but over the last five years flex space has increased in the city at a rate of just under 350 percent outstripping Central London which saw an increase of circa 210 percent. New markets for operators will be chosen carefully, operators will not target every city and secondary cities are less likely to see the widespread adoption of flex.
“London will also see further growth as operators plan to expand their footprint in the capital, however in the short term, the pace of growth may slow due to supply dynamics in Central London. The increasing number of landlords launching their own platforms and therefore seeking not to let space to flex operators may also impede their expansion.”
In addition to the changes that the evolving flexible office model has brought for operators and occupiers JLL’s research highlighted the inevitable effect it has had on landlords and developers. They are being forced to consider what the rise of the sector means for their portfolios and how to make sure that their space remains relevant and delivers the best returns. Limited exposure to the flex sector is now generally associated with an upside for the landlord with the right operator activating leasing velocity as well as energising communal spaces without significantly impacting yields.