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Evolving from a disruptive to a significant and dynamic force within commercial property, the flexible office market continues to expand, significantly outpacing other areas within the property sector.
Its growth has been global, led by the London serviced office market, which grew by almost 20 per cent last year and where rental rates have hit record highs.
Despite economic and political uncertainty,this growth is showing no signs of slowing. Traditional Landlords such as British Land and The Crown Estate have begun to capitalise on the boom, launching their own flexible office offerings. Long-term, income-seeking institutional investors such as pension funds and insurance companies are also waking up to the powerful income opportunities that serviced offices offer and are beginning to commit to the sector.For example, earlier this year FTSE -250 REIT RDI took an 80 per cent 80% interest in a portfolio of four of our established high quality serviced offices.
Technology is liberating how and where businesses operate and employees are becoming more footloose. Being ‘cloud-based’ means that businesses are no longer confined to ‘these four walls’, a phone and a desk;and are therefore not well served by traditional, static square footage. The inherent flexibility and minimal fixed costs that flexible offices provide have meant that small and medium sized businesses have been early adopters. SMEs accounted for 99.9% of all private sector businesses and 60% of all private sector employment in the UK at the start of 2017, making demand for flexible space intense, and with 4.5 million new businesses predicted to start up in the coming decade, it is unlikely to slow down in the foreseeable future.
Political and economic uncertainty is driving businesses away from traditional leases, towards flexible office space. UK businesses are increasingly hedging their bets, shunning the fixed terms and fixed costs associated with traditional, long-term office leases in favour of greater flexibility. A company’s ability to scale office space up or down quickly and easily according to its needs without incurring moving costs – not possible with the static square footage of conventional office leases – can ensure that productivity and profitability are maintained.