The European office sector is facing increasing demand for flexible offices, known as Workplace as a Service (WaaS), according to new research from real estate advisory Savills.
The average share of WaaS in Europe reached 7.5% (a total volume of 680,000 m2) in Q1 2018, up from 7.2% in 2017 and almost three times higher than figures recorded in 2016. Since the first quarter of 2017, more than 820,000 m2 of European offices have been taken by flexible office space providers.
The largest market over the past five quarters was London (217,000 m2), followed by Paris (126,000 m2) and Berlin (81,000 m2), although the UK city of Birmingham registered the highest share of WaaS (24%). Brussels and Dublin saw some of the biggest growth trends, passing from 4.9% to 20.5% and 5.9% to 20.2% respectively year on year.
WeWork largest occupier
WeWork was the largest occupier since Q1 2017 with almost 295,000 m2, followed by Regus/Spaces with about 155,000 m2. Investors have been responding to the trend, with financial group SoftBank Group Corp investing in WeWork about a year ago, while Blackstone bought The Office Group.
Eri Mitsostergiou, director of European Research, Savills, commented: ‘Across the office space sector in Europe, we are seeing a demand for higher flexibility, shorter leases and personalised services.
‘Looking forward, we expect to see further expansion of the brands that offer Workspace as a Service (WaaS), especially in the markets where the share of their activity is still low and where there is less diversity in the number of providers compared to London, Paris or Berlin,’ Mitsostergiou added.
Changes in the labour market over the past decade have been fundamental, according to the research. The rise of the gig economy, the entry of millennials into the job market, the growth of independent workers and the tech revolution have all contributed to the increase of WaaS take-up.
Landlord strategies
Landlords are responding with a variety of strategies. In some cases, they offer part of their space for rent on shorter leases, providing services in order to satisfy occupier demand, as British Land did by launching Storey, a WaaS brand. Savills reported that 94% of the deal volume related to lettings, with only 6% owner-occupier deals.
Cal Lee, head of Savills venture Workthere, said: ‘Businesses are quickly realising the benefits of serviced accommodation, not just the flexibility, but also the amenities these new spaces offer.
‘As a result, we expect to see demand continue to grow over the next year, supported by further acquisitions by serviced office providers, particularly in those towns and cities that have a lower supply of flexible office space,’ he concluded.
