Serviced office take up across the UK has more than doubled in the first half of this year, reaching 1.07 million sq ft compared to the corresponding period in 2016, which saw 386,750 sq ft acquired, according to new data from Savills.
The company reports that while central London unsurprisingly saw a significant increase with take-up reaching 860,368 sq ft in H117, a 186% increase on the 300,506 sq ft in H116, the markets outside the capital also saw substantial growth.
Savills research shows that the M25 office market saw take-up by serviced office operators rise from 44,676 sq ft in H116 to 109,886 sq ft in H117, while in the regional markets, serviced offices accounted for 4% of overall office take-up in the first half of the year at 95,987 sq ft, compared to 41,568 sq ft during the same period in 2016.
Jeremy Bates, head of UK & European Occupier Services at Savills, said: “As one of the most mature serviced office markets in the world, it is no surprise that London has witnessed such a substantial increase in serviced office take-up this year. However, what is interesting is that we are now seeing these requirements move further afield into the rest of the UK, with serviced offices operators recognising the growing strength of these office markets and the changing nature of occupier requirements.
“In particular, we have seen large transactions take place in Birmingham, Reading and Manchester where WeWork took 55,802 sq ft at 1 Spinningfields. The significant space being taken by serviced office operators in these cities demonstrates an on-going commitment and confidence in the sector.”
One of the key drivers behind the rise in popularity of serviced office space is the expansion of the tech sector and, more specifically, start-ups and scale ups, according to Savills.
Cal Lee, head of Savills new venture Workthere, said: “Flexibility in terms of space and lease is vital for a tech company, or indeed any fast growing business. Whether they are two people or 50, in a month they could be 10 or 100 respectively and therefore the flexibility allows them to grow and adapt at their own pace letting the space work around their business. In many cases a conventional lease simply does not meet the requirements of these fast growing businesses who tend to think in 1, 2 or 3 years, rather than 5 or 10.
“Although it is not just the tech sector and start-ups that are targeting co-working and serviced office space, we are increasingly seeing larger firms and corporates recognising the benefits of having a presence in a serviced office environment as it provides them with an opportunity to integrate and collaborate with these new and creative companies as well as access a growing talent pool.”
Looking forward Savills observes that, as the serviced office market continues to expand, the competition between operators could intensify with the potential for some consolidation and more landlords entering the market.
Lee added: “The serviced office market is not a new concept, but its recent renaissance, propelled by new operators transforming the market, has certainly added a layer of disruption to the conventional commercial real estate market.”