New Report Gives Insight Into London’s Growing Flexible Office Market

Coworking and flexible office spaces have been taking off in London, according to a recent report by HubbleHQ in partnership with JLL. The 2019 report breaks down recent trends for coworking in London by area of the city, offering insights into what matters most to clients and where the industry might be headed.

What matters most?

With over 14.7 million square feet of flexible office space in London and an estimated 11% of flex stock by 2023 (versus 6.3% now), many of the 150 London providers will find themselves needing to stay on the front end of rapidly changing customer needs. For submarkets with a higher concentration of coworking spaces—such as Shoreditch (15%), Southbank (13%), Paddington (13%), and Clerkenwell (12%)—the trends and trajectory of the market are even more important.

The highest submarket for coworking, however, is Waterloo, with a whopping 20.5% of its office stock is flexible office space—13% of which will be owned by WeWork, which has committed to leasing the 280,000 square foot Southbank Place.

Currently, the HubbleHQ report notes, what matters most to London coworking space members is location and price. However, while one might assume that this means the focus of coworking spaces would be in lower priced locations closer to the tenants’ homes, HubbleHQ actually found that more and more workers are willing to pay more for a city center location—a trend that has created a need for a delicate balance between location, price, and value.

Why City Centre?

Even though the center of London is the most expensive option for a workspace, over 70% of the flexible office spaces are there. Aside from city center allowing for more convenient access to clients and transportation, the report noted that central London locations are also able to attract new talent with the prestige and local amenities a central location can offer.

While city center is expensive, some areas offer the prestige of central London without the standard £500 to £800 prices. Areas such as Angel, Farringdon, Great Portland Street, King’s Cross St. Pancras, and Old Street offer coworking desk prices under £450 on average—a much more affordable option for coworking space members who want the centralized convenience and amenities without the hefty price tag.

However, the report also notes that there has been “a big shift in mentality, away from focusing simply on ‘getting a good deal’ and towards understanding the wider impact an office has on a business.” This trend will be important for space owners and operators to keep in mind going forward.

Northern London

Creatives are flocking to Camden, the report notes, citing both affordability and the easy transportation links to city center. Currently, however, flexible office space in Camden is limited—something that will change with the opening of the new LABS office space in Hawley Wharf.

The average price for this area is £375.

East London

East London offers an even more affordable option than Camden, with coworking spaces in Bethnal Green averaging around £279 per month. However, the lower fees are also coupled with fewer transportation options, making this area less attractive for clients who do business with clients in other parts of the city.

Canary Wharf

This area of London used to be one of the most prominent financial districts, but HubbleHQ cites several factors in the recent 6% fall in average price per desk. Although the rent rate is still fairly high in this area—£609 on average—the report suggests that perhaps Brexit has caused some businesses to move to other cities outside the UK. More likely, however, is that businesses are more interested in paying similar rent rates for a more central location, better amenities, and a wider talent pool closer to city center.

Southbank

With mid-range rent prices (around £498) and lots of high-quality office options, Southbank has quickly become a hot spot for startups, SMEs, and many other businesses. Borough rent prices have risen 19% in the past year, and many of the businesses in the area are more and more willing to pay higher rates for premium office options.

West London

West London locations like Ealing have perhaps the widest range of pricing options, from premium offices that are over £1,000 per month to budget options around £500. The prices average out around £347, and many businesses find the close proximity to Heathrow airport attractive.

Discounts and Competition

While averages vary widely across London, it’s also important to note that the prices available from coworking space websites often do not reflect what clients actually pay. As coworking grows and more and more options become available, many companies are responding to increasing competition by offering discounts and promotional rates to attract new businesses to their spaces.

The result? Businesses pay an average of 15% less than the online list price for any given coworking space in London.

What do clients want?

Recent trends revealed several trends in what current clients are looking for in London, many of which have changed drastically since 2017.

For example, fewer clients are interested in 24-hour workspace access, but significantly more are interested in dedicated phone booths, gym facilities, and workspaces that allow pets. Refreshment options—such as fresh fruit and snacks, beer, and wine options—are also becoming more attractive.

In keeping with the growing shift toward prestigious office spaces, however, the largest jump in client needs was rooftop terraces attached to office spaces. While searches for other factors saw changes of up to 20% from 2017 to 2018, searches for office spaces with rooftop terraces jumped 238% in 2018 as compared to 2017.

Of course, some amenities—reliable, fast internet, meeting rooms, intelligent office layout, and natural lighting—are stable across the board, and will be considered basic expectations for the London coworking market.

Fast-Paced Market

HubbleHQ, which helps businesses find office space, noted that they recently helped one company locate a new office and move their 28-person team in the span of 48 hours—a statistic that illustrates the increasingly transient nature of office space in London.

The average business is only signing a contract for 9 to 10 months in London, meaning that coworking spaces not only have constant opportunity for new clients but also that they’ll need to focus on client retention to keep their spaces full.

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