THE RACE FOR SPACE

14 CUSHMAN & WAKEFIELD 15 RACE FOR SPACE CO-WORKING IS THERE AN IMPACT ON PRE-LETTING? Against a backdrop of continued demand for flexibility from occupiers in both lease terms and occupation, there is a potential threat emerging that could disrupt the frequency and scale of off-plan pre-lets. Does co-working pose a threat to off-plan pre-lets? We know that occupiers are increasingly looking as far as four to five years ahead of a potential move in order to secure the right space for their business, but there is now another option which allows occupiers to wait for the right building to come along. By taking shorter term flexible space as an interim solution, occupiers are now in a position where they can relocate temporarily in a flexible option, giving them more leverage in what has been a supply- driven market in recent years. Whilst flexible space is certainly now a more realistic interim option for many occupiers, especially given the rapid growth of WeWork, The Office Group and Spaces’ respective portfolios, there may yet be an opportunity for landlords to capitalise on this increased demand for flexibility, as well as achieving their pre-let ambitions. If traditional landlords could facilitate a short-term flexible move within their portfolio, they could allow prospective pre-let tenants to expand or contract whilst preparing for a future wholesale relocation. This will, therefore, only be possible for landlords that either have their own flexible space platform, or indeed those who have partnered with a third- party provider. With flexible providers acquiring large-scale schemes with hundreds of desks available, they have quickly become a significant competitor for all types of relocation or expansion. “WE BELIEVE CO-WORKING PROVIDERS SHOULD NOT BE THE DOMINANT TENANT IN A SCHEME, IT’S ABOUT BALANCE.” A Central London Landlord FLEXIBLE WORKING • Flexible workplace providers have had a significant impact on the Central London office market, especially over the last three to four years. Despite accounting for 21% of all take-up in 2017, flexible providers account for just 6% of total pre-let volumes over the last ten years. • There has been a total of 1.56 million sq ft of pre-let take-up from flexible workplace providers over the last ten years, of which just 243,000 sq ft was let off-plan. • This preference for schemes under construction is evidenced by an average lead-in time of 14 months. Flexible Workplace Providers who have pre-let space in Central London “CO-WORKING IS VERY IMPORTANT FOR LARGE-SCALE SCHEMES. YOU NEED TO HAVE THE CRITICAL MASS OF YOUNG, SMALL, GROWING COMPANIES THAT HAVE THE OPPORTUNITY TO GROWWITHIN THE PORTFOLIO.” A Central London Landlord Figure 10 Central London flexible workplace pre-let take-up (2010-2018) 0 1000,00 200,000 300,000 400,000 500,000 600,000 700,000 800,000 2018 2017 2016 2015 2014 2013 2012 2011 2010 sq ft Source: Cushman & Wakefield

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