By Cal Lee, global head of Workthere
London is in fact home to over 1,200 coworking locations (compared to New York which only has 600), not to mention over 300 different providers that operate ranging from household names, such as WeWork and IWG, to independent providers including Worker’s League and the family run Finsbury Business Centre. Despite the likes of WeWork dominating the headlines of late, it is important to highlight that the concept of coworking is not new and has been around for several decades. It is however fair to say that it has undergone somewhat of a renaissance in recent years with the new and established brands in this space positioning themselves as reputable providers championing innovative office design.
The Office Group is one such example of how a brand, which was founded over 15 years ago, has been able to sustain growth and longevity in a competitive market, now boasting a presence in 44 UK locations as well an expansion into Germany, with more global locations expected in the near future. With a strong focus on the design and feel of an office, especially regarding the individuality of a space, having a point of difference in the current market has been vital for The Office Group to stay current and relevant.
So how has this exponential growth in the UK been possible?
There have been 2 key drivers of growth over the last decade for co-working in the UK, the first came with the considerable increase in the number of new businesses being set-up following the GFC in 2008, year on year we saw record volumes of investment into start-ups and scale-ups that needed flexibility as they scaled or failed, but also did not have covenant or the capital to take a lease, and therefore we began seeing a surge in the number of new co-working and flex providers to accommodate the demand. The UK accounted for 35% of all European venture capital investment in the first half of the year.
The long-lease structure in the UK and landlord leasing process has played into the hands of the co-working and flexible office market not only with start-ups, but increasingly at the mid-sized and larger end of the office market with SME’s and global corporates seeing the benefits of space as a service. The UK structure has always been more favored towards the landlord where tenants would sign up for 10-15 years, in addition to the fact they have to outlay a significant capital expenditure to fit-out the office, and subsequently remove their fit-out at the end of the lease. This whole process does not make it easy for a tenant to acquire a new office space. It therefore comes as no surprise that the second stage of growth is being driven by the medium and larger enterprises turning to flexible office space instead of renewing their lease.
So how is this trend translating across Europe?
The coworking market in Europe, although relatively nascent compared to the UK, US and Asia, has completely transformed in recent years and a range of companies from smaller startups to larger corporates are turning to flexible working space as a long-term alternative to renting a conventional office. UK brands such as The Office Group and Huckletree have already expanded overseas to the likes of Germany and Ireland. Using UK models as a basis, providers such as Welkin and Meraki (France), Offices for You (Netherlands), Betahaus (Germany) and Utopic_US (Spain) have all become well-established names for European companies of all sizes across capital cities and other regional locations.
Locations all across Europe are becoming hotspots for coworking and, unsurprisingly, this is having an effect on the current supply chain. With unprecedented levels of demand, some locations such as Dublin, Amsterdam and Paris have seen a lack of stock on the market, therefore driving up prices. Paris for example, has seen the average cost of a desk within a private office rise to above €900 per desk per month, significantly higher than the London average of €700. These providers are all benefitting from relatively low vacancy rates across Europe, therefore as more global companies expand their presence into key European cities they have little choice other than a co-working or flexible office space, and we expect this demand to continue to drive the growth of the market. In addition, we expect the rising VC investment levels to show a similar trend to the UK and drive growth in demand from Start-ups and SMEs, in particular across Germany, Finland and Denmark.
Can we expect to see this trend continue? In a word, yes. As the UK market continues to grow (especially in regional locations outside of London) we expect to see similar growth patterns in Europe – especially in those markets (such as Germany, Finland and Denmark) which have seen some growth, but with capacity for significantly more. Despite slight changes in the UK market, which is going through a period of change driven by consolidation, the youth of the European market means that new providers are still proving as successful as those that are more established. With only 6% of workers in flexible office space unhappy with their workplace, according to Workthere’s What Coworkers Want report, there is much reason to celebrate the coworking trend as it takes Europe by storm.
Browse flexible workspaces in various locations across the globe here.