Will flexible offices’ rapid growth impact office rents?
According to GRI Hub,
Flexible office space is growing fast, and not just through WeWork’s headline-grabbing global expansion, fuelled by funding from SoftBank. In a research report published in November 2018, real estate consultancy JLL notes that Europe’s flexible office space sector is set to grow by up to 30% per year over the next five years, pushing the total market size of the flexible office space sector in Europe to 10 million square metres.
Green Street’s calculations come in lower than those of JLL: Green Street reckons that the take-up of flexible office space in central London in 2017 was 17% of total office space, reaching a similar level in 2018, and that flexible office penetration in the central London market will be closer to 10% by 2030. At that level, and based on an assumption that total central London office stock remains flat, Green Street’s projection is that there will be a 3% vacancy rate in central London offices.
“A vacancy rate of 3% signals a tight market,” says Rob Virdee, co-author of Green Street’s report. “At that level there will be some rental tension. Currently, vacancies are about 3.5% for West End offices and about 5% for City offices. In our base case scenario, flexible offices are not going to be that much of a disruptor.”
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