The London serviced office and co-working sector

Last updated: 17/01/2024

London serviced and co-working office market

Q4 2023 update

The flexi-office (serviced, co-working and managed office sector) has been a notable component of leasing activity. This trend is reflective of the continued growth in demand among smaller and mid-size businesses (typically those with less than 50 employees) for office space that is ready fitted out, therefore not requiring any significant capital investment by the ingoing tenant, that is available on flexible leases of 1 – 3 years. 

Interestingly, an increasing number of landlords of “conventional” (non-serviced) small office suites, typically below 5,000 sq ft, are fitting out available accommodation and offering it to let on a “plug-in-and-go” basis in order to compete with the serviced office market. 

Flexi-office demand is being fuelled by a combination of drivers, which include: start-up businesses, established enterprises that are unable to find good quality conventional space with good sustainability credentials that falls within budget, fast growing businesses that need the flexibility to be able to move to larger accommodation at short notice and those organisations serving a short term business contract. Demand is further being boosted by those businesses that are reluctant to commit to a long-term lease in the wake of the current uncertain economic climate. It is likely that the flexi-office market will be one of the main beneficiaries of the unfolding artificial intelligence revolution as increasing numbers of small start-up enterprises develop from this emerging business sector.

The robustness of flexi-office demand is leading some serviced office businesses to go back on the acquisition trail seeking space for conversion. However, and very significantly, an increasing number of flexi-office operators are seeking to structure the acquisition of additional accommodation by way of management agreements with building owners, rather than conventional leases, under which revenues generated (and risks) are shared. 

Typical rents for serviced office accommodation range between £700 - £1,200 per desk per month in the West End and £550 - £900 per desk per month in The City, depending upon quality, scope of services being provided and micro-location.

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