August 8, 2019
Although London retains its status as the European capital of flexible offices and coworking, a new report from Colliers International claims that the capital is also enjoying above average demand for conventional office space, coupled with reduced footprints overall, as corporate occupiers seek to expand their businesses but without taking on property at the same rate.
However, to add to the signs of an increasingly complex market, the report An Absorbing Picture: London’s Changing Occupier Frontline, also suggests that firms in London’s most important business sectors are also reducing their overall office requirements even when they employ more people.
Financial services appear to be at the forefront of such ‘spatial revisionism’, partly driven by pressure on profit margins and the need to reduce overheads
The report concludes that “while choice for occupiers appears constrained with respect to conventional office product, the availability of flexible, short-term space in London is unrivalled across any other major global commercial hub. Add to this the trend toward leaner and more efficient footprints for all occupiers, across all sectors, and it is likely that space take may fail to match the overall space vacated.
“Financial services appear to be at the forefront of such ‘spatial revisionism’, partly driven by pressure on profit margins and the need to reduce overheads, but also fuelled by technological advances and the recognition that it no longer takes as many personnel to ‘number crunch’ as it used to. Flexible office providers are increasingly eating into conventional market share, making occupiers more footloose than ever before.”
The conventional office market bounces back
The research claims that there “overwhelmingly positive” letting activity in the conventional office market, despite the growth in activity in the flexible offices market and ongoing Brexit uncertainty. Colliers notes that landlords have been buoyed by this performance and, despite high demand from flexible office operators, are pushing back in favour of longer-term leases:
“The serviced offices sector has been a major contributor to transaction levels over the past three full calendar years,” the authors argue “Indeed, the perceived wisdom, that Landlords, now encouraged by a sharp improvement in demand from conventional office occupiers, are resisting overtures from flex providers, seems to be backed up by 2019 figures to date. The West End market saw exceptional demand from flexible office providers in 2018, as competition for market share drove activity. The climate has changed in 2019 though, with landlords and developers less reliant upon flexible growth to fill up office buildings and thus starting to resist approaches from the serviced offices sector.”