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The evolution of flex

Flexible workspace take-up stands at a hefty 1.6 million sq ft, driving tangible change in the market.

Companies are beginning to explore the potential of flex space as an end-to-end solution.

Tom Leahy, Head of London Flex, JLL UK

The way people work and how businesses occupy their real estate has changed at breakneck pace in the last decade and London is leading this flexible revolution, dominating the market in terms of take-up, and the range of operators and formats on offer.

Over the last three years we have seen the amount of flexible space increase by between 25% to 35% a year, driven primarily by an ever-increasing number of providers. We expect this trend to continue in 2019.

Following unprecedented take-up in 2017, when flexible workplace operators accounted for 20% of leasing activity across Central London, the pace moderated to some degree in 2018 but still reached a hefty 16% of take-up (1.8m sq ft).

Flex operators are seeking to accommodate the changing needs of occupiers and the market is now at an inflection point and has the potential to offer deeper and more integrated real estate solutions to large enterprises. We are seeing companies beginning to explore the potential of flex space as an end-to-end solution across the real estate lifecycle. Perhaps most importantly, the rapid growth of flexible and managed space solutions is driving real and tangible change in the wider market.

Changing occupier needs

As occupiers become more sophisticated, they increasingly need adaptable workforce strategies, that incorporate core and flex options. Where an occupier has a core of longer term fixed space and access space, they can flex up and down depending on their needs.

The option of flexibility around lease lengths can be a key driver for occupiers to seek flexible space. For instance, while flexibility was a key requirement, RELX wanted a more creative environment to expand the corporate arm of their business, Lexis Nexis. Finding the right space was key, so we liaised with numerous flexible providers to find a solution that met RELX's specific needs.

There are now more than 60 unique flex space operators across Central London, with a number of new platforms emerging that are crucial to meeting the evolving demands placed on this arena. Assisting these providers to identify and acquire the perfect real estate for them to create the optimum flexible environment requires an in-depth understanding not only of the sector, but the submarkets they are operating in and their target audience.

Flexible office provider, One Avenue, needed a new home for a number of clients when their current space was redeveloped. Our London Unlimited team used their landlord relationships to proactively target and source 57 Southwark Street, SE1. The building needed refurbishment to bring it up to standard and One Avenue offered the capability to do this, adding value to the asset while also fulfilling a gap in their portfolio.

Looking forward

With around 15% of Central London’s active requirements from flex workspace operators, we expect the sector to continue to expand in London in 2019 and beyond. A key growth driver is likely to be the increasing adoption of 'core and flex' real estate strategies by corporate occupiers. This is where an occupier has a core of longer term fixed space and access to space where they can flex up and down depending on their needs.

Reacting to this trend, we expect that more landlords will implement their own flexible workplace offer in 2019. British Land (Storey) have been joined by L&G (Capsule) and The Crown Estate (One Heddon Street) while others, such as Tishman Speyer, are trialling their own brand (Studio) outside the UK, and LandSec have announced that they will launch a flexible product at 123 Victoria Street in early 2019.

This article was written by Tom Leahy