The flexible office market has exhibited remarkable resilience and growth, despite economic uncertainties. Here are some of the biggest trends we are currently seeing in the UK and continental Europe:

Management agreements 

In the UK, there has been a growing preference towards management agreements, which accounted for 43 per cent of deals by the end of H1 2023, a substantial increase from just 9 per cent in 2019. There are currently 14 serviced office operators looking for space over 20,000 sq ft across the UK, with 93 per cent of these seeking a management agreement structure.

In the European flex market, management agreements are becoming more popular in regional cities that have higher vacancy rates due to rising operational costs. However, it remains challenging to negotiate rents low enough with landlords, while meeting the growing demands of customers for best-in-class spaces. For instance, in Paris, operators and landlords often opt for traditional lease arrangements with headline rents over management agreements. Nevertheless, as landlords become more familiar with management agreements, their adoption is expected to increase in secondary locations across Europe.

The cost of demand 

The average price per private office desk in the UK H1 2023 was up 15 per cent on the first half of last year, and surpasses the desk price pre-Covid-19 by 30 per cent. Simultaneously, inquiries in the UK have increased by 12 per cent year-on-year, marking an astounding 173 per cent rise compared to pre-pandemic levels. However, despite the high demand, the limited availability of grade A quality supply has led to market polarisation, with a flight to, and fight for, quality.

In Europe, operator demand remains steady, but, just as in the UK, there is also a persistent shortage of quality office stock. Many large operators have reported contract occupancy rates approaching the 80 per cent mark in European markets, which typically signifies profitability. As occupancy rates continue to rise, desk prices are projected to increase further over the next 12 months.

New players and expansion  

While WeWork and IWG Group dominated take-up between 2013 to 2019, The Office Group, Orega, and Spacemade have been actively reshaping the landscape since 2021. Orega, for example, plans to nearly double its UK portfolio size over the next two years, with a focus on expanding in various UK cities. Spacemade aims to open 50 locations across the UK by 2024, further diversifying the market. Other operators, including x+why, Cubo, and Venture X, are also expanding their presence.

In Europe, to highlight just one example, Scaling Spaces is set to take over 1,000 sq m of office space outside Berlin for the first time and signalling its ambition to grow in other locations. Currently, the company operates over 20,000 sq m of rental space, marking another significant stride in the flexible office market's evolution.

A rise in management agreements, increasing desk prices and more and more operators expanding into new locations are just three of the current trends showing that the flex market is continuing to grow from strength to strength. 

Further information

Contact Simon Preece or Mike Barnes

Spotlight: European Flexible Offices – Autumn 2023