C&W Perspectives

immature of the regional cities at less than 2%. Traditionally however there have been some key differences between the Flexible Workspace market in regional cities and London. 1. Centre size Regional centres are generally smaller with average sizes varying from 8,000 sqft in Edinburgh to 24,000 sqft in Manchester. This is compared to an average centre size in London of over 40,000 sqft in 2017. Whilst this difference is somewhat dependent on availability and supply within each market, some operators such as WeWork are now deliberately leveraging size to drive economies of scale in their operating model. 2. Product and proposition The pace of growth of this sector in London has resulted in a significant diversification of the traditional serviced office model with a growth in coworking or ‘hybrid’ operators (a mix of coworking, serviced offices and meeting rooms) alongside more targeted propositions catering to specific budgets, business sectors and demographics. The regional markets have until now demonstrated a heavier reliance on more traditional first-generation offerings however is WeWork’s entrance into the Manchester market a sign that things are set to change? The WeWork strategy Taking a step back from the UK and looking more broadly at the global strategy of WeWork when it enters a new market, be that regional or national, the growth trajectory in the first 12-24 months is steep. Looking at a selection of global cities, the average number of WeWork centres that open or are in the pipeline after the launch of their first building is 4.5 within 12 months. For example, In Dublin, WeWork opened their first centre at Iveagh Court in June 2018 and 3 months later already have a further 3 centres planned. In other global cities, WeWork have opened or secured on average of 9.5 centres within 24 months after their first opening. Just 26 months after entering the Chinese market with their first location in Shanghai, there are 18 centres planned or already open with similar stories evident in six other Chinese cities. In London, 4 years after opening their first centre in October 2014 in Southbank, there are now 39 locations committed averaging just under 10 centres per year. This pace of growth is dependent on the size of the market and stock available, however, so far with two centres open and rumours of negotiations being in hand for further take up WeWork’s Manchester expansion is right on track. On the coat tails of WeWork’s Manchester market entry, it is likely that we will see an acceleration of growth in the Flexible Workspace sector as the model becomes more broadly established. We expect the growth to be driven by both local and national operators who will change the market dynamic by diversifying the range of propositions on offer, challenging local incumbents and ultimately delivering more choice to the end customers. As the market evolves we expect to see an increase in size as well as number of centres, and also anticipate this change to seed some new and innovative solutions in this space. In London, we have seen that the wider market growth driven by WeWork’s rapid expansion in the market has forced many existing operators to re-examine their offer, as customers ultimately have the ability to leverage the flexible nature of their agreements to try out new and exciting options. The UK has a diverse mix of regional markets which can all attract major players to act as a catalyst for wider change. With Flexible Workspace already booming in Manchester and Dublin the question to be asked is where next? When [WeWork] enters the market, the growth trajectory in the first 12-24 months is steep CUSHMAN & WAKEFIELD 19 TOPICAL