In the space of a year, the amount of serviced space in the UK has grown by 116 per cent, from 386,750 sq ft in the first half of 2016 to over a million sq ft by the end of June 2017.
Unsurprisingly, London has been the epicentre of this rise, seeing growth of 186 per cent, but there has been substantial growth elsewhere, too. The M25 office market saw take-up by serviced office operators rise 146 per cent. Meanwhile, further afield in the regional markets, serviced offices accounted for 4 per cent of total office take-up in the first half of the year at 95,987 sq ft, compared with 41,568 sq ft during the same period in 2016.
Serviced office providers have evidently recognised that cities such as Birmingham, Reading and Manchester have strong office markets, with occupiers in the UK’s regions mirroring those in London in seeking greater flexibility in terms of space and lease length.This is particularly true among occupiers in the tech space and other fast-growing start-ups. Such companies cannot take the risk of committing to a conventional five- or 10-year lease when they don’t know whether next month they will be two people or 20.
It’s also been well reported that larger firms and corporate occupiers are following the tech sector’s and start-ups' lead and have recognised the benefits of having a presence in a serviced office environment, as it provides their employees with the opportunity to integrate and collaborate with new and creative companies, as well as the ability to access a growing talent pool.
These factors have combined to boost demand for space and make serviced office providers one of the most active sectors in terms of take-up so far in 2017. But the question is where does the market go from here?
With several dozen operators now active in the UK, plus some landlords, such as British Land, also offering their own serviced office spaces, competition between operators is set to intensify with the potential for some consolidation in the market. Serviced offices are by no means a new concept, but their recent renaissance, propelled by new operators who have offered fun, creative spaces light years away from the neutral, corporate boxes often offered by the sector in the late 1990s and early 2000s has added a layer of disruption to the conventional commercial real estate market.