Flexible office trends to watch for in 2019:
Globalisation of providers
Businesses are increasingly scaling to new markets and territories and therefore the flexibility to allow this is becoming increasingly important for providers as the ability to offer customers multi-global locations can be a powerful selling point and differentiator. Last year we saw TOG announce its first European location in Frankfurt, Knotel enter the London market and The Brew tie up with German provider Rent24. We expect more and more providers to expand their business into new territories in 2019. In particular it is likely we will see: more US names entering Europe; UK brands establishing a presence in key European cities such as Dublin, Berlin, Frankfurt and Paris and the US and more Asian providers coming in to Europe and the US.
Growth of niche
For a while now we have seen tech and innovation-only co-working spaces such as Huckletree, Techspace and Runway East in London who screen applicants to curate a community of like-minded businesses. However, given the current competition of different spaces in the market, we expect more new providers to focus on a niche in an effort to differentiate themselves. We are already seeing the emergence of female only co-working space and we expect more spaces to focus on sector niches such as retail and fashion, food and businesses with a social purpose.
In addition, there has been an emergence of spaces offering a niche facility as a means to attracting clients. The big trend we expect in 2019 is the growth of the on-site crèche or nursery for parents to work whilst their children are looked after. Thirdspace and Cuckooznest have started the trend in London and we anticipate more providers will follow suit, especially as the flexible providers move into more residential areas.
Rise of co-working landlord
There is no question the landlords have woken-up to the world of co-working, but only a handful have really jumped in and actually delivered their own space, such as British Land with Storey or Blackstone with Yourspace at Chiswick Park. We anticipate that 2019 will see a surge in the number of landlords delivering their own flexible office product as part of a wider office scheme as they seek to compete with the co-working market as tenants continue to seek flexibility and service. The challenge for landlords will be the service and hospitality element. For the providers it’s not just about providing a space and collecting rent, they go above and beyond to ensure that businesses thrive in the space they occupy.
Given the number of new entrants into the serviced and flexible office market, there has been an inevitable growth in competition on pricing, particularly in London, and we expect to see some winners and losers with a rise in consolidation between providers. Deskmag reports that 40% of co-working spaces do not make a profit, this is a significant number and, given the continued rise in competition, for many this is not likely to be sustainable. Providers at risk should pay particular attention to who their core customer base is and what type of space they want. Often we see providers seeking to scale too quickly or develop a product that doesn’t meet their market demands and this is when they can come into trouble.
The hope for transparency
The final point is not so much a prediction but a hope. There is still much scepticism around the serviced office sector from those outside and, in order for it to be taken more seriously as a mainstream market from a valuation and investment perspective, it will require more transparency from all providers on occupancy levels and rates achieved.
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