Regional flexible office take up surges in Q124 as operators look to expand

Flexible office take-up in the regional city markets outside of London totalled 63,000 sq ft in Q124, according to international real estate advisor Savills, which represented a significant increase on the 4,768 sq ft recorded in Q423, and by the end of the year is expected to surpass the 2023 annual regional total, which reached 105,000 sq ft. Central London was the most active market in Q124 accounting for 154,000 sq ft take up.

Savills notes that this surge in activity has been driven by increased appetite from operators to boost their presence outside of London. Leeds in particular saw a substantial surge with three flex office deals taking place in the city, which accounted for 43,000 sq ft and included Cubo taking an additional floor in Wellington Place, Orega opening a new 25,000 sq ft space and Wizu taking a 10,000 sq ft space.

Overall flex office take-up across the UK in Q124 reached 217,000 sq ft, which is in line with the Q123 figure for 2023 of 224,000 sq ft.

Alex Knott, associate director at Workthere, Savills flexible office specialist, comments:

Demand for flexible office space has remained consistent from occupiers and has been driven most notably from corporates looking to diversify their portfolio and flexibility for staff. As a result, we have seen operators looking to expand into undersupplied regional centres across the UK, a trend that we expect to continue in Q224. This is a stark change from the beginning of last year, when no flex office take-up was reported outside of London during the first quarter. There is a clear drive from operators to establish a strong footprint on a regional scale with the likes of Runway East, Spacemade, X+Why, Orega and Cubo leading the charge. We expect demand from operators seeking space in London to remain strong, however the best opportunities remains highly competitive and hard to find.

Savills also notes that the growing market acceptance of management agreement deal structures continued in the first quarter of 2024 with 50% of deals agreed being on this lease type. Simon Preece, associate director in Savills commercial research team, says:

Landlords are increasingly viewing flexible office space as an amenity offer within a building and can be a key attractor to appeal to corporate tenants. This viewpoint has helped promote management agreements and we expect this to continue throughout the year.