One of the most remarkable trends being experienced in the world of offices currently is the continued rise and dramatic pace of growth of start-ups. The UK has a rich history of entrepreneurship and examples of start-ups evolving into internationally recognised brands is nothing new: Skyscanner, acquired by a Chinese firm for £1.4 billion in 2016, is one example; Deliveroo, valued at £1.5 billion, another.

However, the sheer pace of growth in this new wave of start-ups, predominantly in the tech sector, is what makes it particularly notable. Access to global markets through online platforms and more readily available supply chains have provided entrepreneurs with the ability to scale up at an unprecedented rate. 

On the face of it, this creates opportunities for office landlords to capture the growing demand and drive more value from higher levels of take-up. However, major challenges exist in moving away from the traditional landlord and tenant relationship where longer leases and stronger covenants drive book value. These two significant factors are at odds with the needs of new, fast growing businesses which often want flexible, shorter leases and aren’t mature enough to demonstrate obvious covenant strength. 

Unsurprisingly, the rise of the serviced office sector is partly in response to the growing number of start-ups. Yet increasingly traditional landlords are also looking at creative leasing solutions to capture this new type of demand. ‘Rights of pre-emption’ over surplus space – essentially a contractual right to acquire space before it can be offered to another party – now form a major point of negotiation and can be a way of accommodating business plans centred around fast growth.

Other landlords have sought to increase their scale of property ownership, meaning that occupiers can grow and be moved around within larger portfolios as opposed to being handcuffed to a single building by a long term lease. Regional giant Bruntwood has long been a master of working with customers to accommodate such growth.

More recently Aviva, with its family of buildings in Manchester, and AEW Europe, with its transformation of Barbirolli Square in the same city, have been able to establish opportunities for businesses to grow and relocate within a wider portfolio. Undoubtedly, this ‘cradle to grave’ proposition is growing in appeal.

Just as landlords are now considering both the life cycle of a building and their tenants, they are adapting design to respond to this ever changing demand. Increasingly buildings are now having to cater for differing style of workspace to include both formal and informal style areas along with the ever growing need for 'amenity'.

In this world of fast moving change and growth, developers and landlords alike are having to think harder than ever about building design to respond to customer needs.

Further information

Contact Savills Office & Business Space