Green Street Advisors

 

 

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.

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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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