The UK office market continues to evolve month-by-month as developers, operators and businesses adapt to changing conditions. Workplace requirements have altered for many, and the available Grade A office spaces are reinventing themselves to meet that.
But what about overall supply? As the country emerged from the Covid-19 pandemic in 2022, available office space “bottomed out” at just 6.2 million square feet across the UK.
Fast forward to the end of Q3 2023 and available office space grew to 7.4 million square feet. More new buildings coming online combined with the rise of hybrid working which saw lots of businesses convert to hybrid model and cut their overall floorspace.
Add in higher interest rates, inflation and lower economic growth, and the market is left in an interesting place as we approach the end of the year. While Savills notes that yields on premium Grade A office space has increased slightly, overall investment in the market has entered a period of stasis, or even decline.
JLL notes that investment in the “Big 6” UK office markets decreased by 61% year-on-year over the first half of 2023 and a 56% decrease over the 10-year average. The picture has improved slightly as the year has gone on, but on the surface it does not bode well for future supply of Grade A space in the UK if the pipeline is being constrained by reduced investment now.
However, this does not hold true for the whole market, and by looking at the flexible office space sector we can see what the future might hold.
Whereas the overall premium office market may be seeing a reduction in both investment and supply, the same does not hold true when it comes to flexible space. In contrast to the wider market, figures from Savills show that supply in the flexible market is falling thanks to an exceptional rise in demand.
This demand is so high, in fact, that the average price per desk in the Grade A flexible sector increased by 15% over the first half of 2023 and has now surpassed the pre-Covid price by 30%. Enquiries about flexible office space are up 12% year-on-year and 173% on pre-Covid levels as hybrid working becomes the dominant form and exerts itself on the market.
Savills goes on to report that the demand has caused an increase in requirements for new spaces from operators, the majority of which is centred on London and the other large regional cities.
This has been reflected at FigFlex where we have recently increased our portfolio by more then 30% following 12 months of high growth. More than 600 desks and 150,000 sqft of flexible Grade A space is now available from FigFlex in some of the UK’s busiest office markets including Coventry, Peterborough and Southampton in response to demand in the market.
While some of the office market headlines may suggest that overall demand for Grade A office space is low – and that supply is therefore higher than normal as spaces sit empty – context is all important. The flexible market has never been busier, and future projections about hybrid working mean that it is likely to continue in this vein.
For both investors and businesses looking for a new office, this is the ideal time to enter the flexible market and secure your Grade A serviced office space. Get in touch with the team today to learn more by clicking here.