A fifth of London’s offices will be composed of co-working spaces by 2030, illustrating the pandemic-induced shift in working patterns that is reshaping the capital’s commercial property market. Currently, these ‘flex’ spaces represent just 12% of the total London office market. However, according to new data from global real estate adviser CBRE, this proportion is set to nearly double within the next five years.
CBRE anticipates that the flexible office market in the capital will reach 50 million square feet by 2030, driven by sustained occupier demand and a growing number of landlords embracing the sector. Landlords are often able to charge higher rates per square foot for flexible office spaces and experience increased leasing activity. Some traditional landlords are now offering flexible terms to tenants, even in buildings not specifically marketed for the flexible market, a trend CBRE analysts have termed the “shadow flex market.”
Michael Glynn, head of UK flex at CBRE, stated, “We are confident that the market will continue to expand due to the sustained and increasing demand for flexibility from occupiers. Defining the flex market, while challenging, is crucial for accurately assessing the opportunities within central London.”
The growth of this segment has also led to an increase in the ‘brandlord’ space, where public-facing brands are created and managed by landlords. CBRE predicts this subsector will reach 3 million square feet by 2030, a 200% increase from current figures. Landlords investing in this space typically cover costs for furnishing and other amenities upfront, securing tenants on short but profitable contracts.
Provider struggles despite growth in market for flexible offices
Despite the expansion of flexible office spaces, the sector faces challenges. The Duke of Westminster’s Grosvenor estate announced plans to more than double its flexible office provision within its central London portfolio to meet changing demands post-pandemic. However, the sector’s short-term focus and inconsistent rent revenue have led to several high-profile struggles.
Earlier this year, London-listed flexible office provider Workspace reduced its profit expectations for the upcoming year, citing rising operating costs and tenant turnover. This follows the collapse of WeWork, the US-based coworking pioneer that rapidly grew to a $47 billion valuation before a failed IPO and governance issues led to the founder’s ousting and a significant drop in value. WeWork filed for bankruptcy in 2023, burdened by escalating debts and high rents, with reports indicating it was spending 80% of its revenue on rent and debt interest before its downfall.
