Office market pressures have intensified over the past year in many locations. Persistent office to residential conversions continue to constrain supply and push up rents. Nottingham has seen a shortage in office space since the boom in office to student housing conversions. Conversely, London is seeing a flood of new and previously occupied space coming into the market, beginning to soften rent levels and values.
The outcome of the EU referendum only adds further challenges. With many businesses now reviewing their UK operations, the sector is expected to be the biggest loser from Brexit.
Those that are willing to adapt can still find opportunities for growth. Technology has caused occupier demands to shift. Digitally enabled businesses are increasingly adopting new working practices. Homeworking is slowly becoming a more engrained part of employment practices.
Technological innovations will cause the biggest disruption to the sector. Intelligent workspace and faster construction techniques will fundamentally change the operating landscape. As autonomous vehicles become a reality, this could lead to the redevelopment of city centre car parks which may no longer be required.
Demand for co-working spaces has also increased as occupiers demand more flexibility around their leases.
RSM’s Head of Real Estate, Howard Freedman says:
Although serviced office providers only make up about 5 per cent of the office market, they are growing extremely quickly. They are providing a service which is obviously needed and is changing the way people think about the workplace.
This year, serviced office provider WeWork became a star of the show, accounting for more than 50 per cent of office space transactions in London alone. It is just one of many new players operating in this area.
Start-up businesses have helped drive demand for modern, flexible office space. For occupiers, co-working environments offer more than just flexibility. They also provide a place to network and share knowledge and ideas. As shared spaces become more ingrained in the British psyche, the lines between working, living, retail and leisure will further blur. Traditional landlords need to keep up.Download the full Real Estate 360 report.