Demand for start-up sized offices of under 5,000 sq ft in size in the capital is nearing an all-time high. Across London in the year to date, lettings of under 5,000 sq ft represented 78% of all occupier deals done by number. This is the third year in succession that the numbers have risen as tech start-ups and scale-ups continue to grow and focus their presence in the London.
Post-referendum scares about a tech exodus have yet to materialise and London is firmly established in the top three global tech hubs.
The burgeoning demand for flexible office product is clearly good news for the co-working operators, but it has also seen ‘traditional’ landlords going on a charm offensive to woo the start-ups which one day may grow into major occupiers. Some observers feared that this attempt to ‘get trendy’ might be the property equivalent of ‘dad dancing’ with the same potentially embarrassing results, but occupiers are being drawn to what the likes of British Land, Brockton Capital, the Crown Estate and the Carlyle Group are offering.
Interestingly, we’re seeing an increasing number of occupiers who have first gone down the serviced office/co-working route now deciding that conventional office space offers more concrete branding opportunities and sends a more sophisticated message to potential clients.
The fact that ‘small is beautiful’ for space providers of all sorts is underlined by the statistic that growth in the small office market has been driven by demand for sub 2,500 sq ft units. It’s now at its highest level since 2012 and is particularly evident across Shoreditch, Soho and Paddington.
So, whilst the flexible office providers continue to develop, they are not wholly dominating this part of the market. Occupiers are drawing distinctions regarding what they can get from a serviced office and what a more mainstream provider has to offer.