The growing market gap: occupiers increasingly need a step between serviced and conventional office space



Cal Lee, head of Workthere

The general trend for start-ups and SMEs is usually to launch in co-working, shared or serviced office space and, all going to plan, eventually graduate to a self-contained lease space once their business has expanded to a stable level.

However, in recent years we have seen businesses remain within flexible and serviced space for much longer before moving onto a more conventional lease. This is often because they are not yet ready to commit to a more concrete agreement as their business is expanding at a rate that requires more flexibility from their real estate. On a conventional lease there is a commitment requirement, usually for a minimum of five years with landlords seeking covenant strength, as well as fit-out costs to consider.

At the serviced end of the market the benefits are well known: the major attraction to businesses is the fact that the space is ready to use and available on flexible terms, allowing companies to grow and expand whilst making their office space work around them. Recently we have seen a plethora of different styles and types of spaces, offering a variety of options to occupiers depending on the experience they are seeking.

However, whilst there are now hundreds of different types of serviced office available, all with slightly different nuances, there remains a common theme: they are usually high serviced environments, already fitted out and often include everything from events and community managers to refreshment facilities and amenities.

What we have noticed is that there is a growing gap between serviced and conventional offices and, more importantly, a growing number of businesses seeking a hybrid of the two - something in the middle. They crave flexibility, but do not necessarily want all the bells and whistles of a serviced environment, nor do they want the commitment of a lease.

We are increasingly receiving enquiries for both large and small requirements for flexible space, that want to move on from serviced office space. So what is the solution? For larger occupiers there is the option of managed space, usually only available for companies of 30 people plus. In recent years we have seen some much needed new entrants to this sector such as WeWork Enterprise or Evolution Working. But there are very few options for smaller businesses seeking a more bespoke environment on flexible terms.

Given the growing relevance of this gap in the market, it is something for landlords and providers to consider. Offering a range of space solutions with an opportunity to pick and choose solutions in order to personalise space could certainly be the answer.