Europe’s ‘second cities’ are set to be hotspots for future flexible office demand

Our latest research with Savills found that smaller capital cities across Europe such as Dublin, Stockholm, Warsaw and ‘non-capital cities’ in core countries such as Hamburg, Frankfurt and Birmingham are likely to see strong demand for flexible office market.

The European Flexible Office Spotlight reports that, while core European capitals including London and Paris, which have more mature serviced office markets, will see higher demand for flexible office space (FOS), other cities that also have dynamic economies and attract innovation and talent will see demand for flexible offices rise.  

As part of the research, cities where future demand is expected to be strongest were identified based on a set of criteria related to economic growth, job creation, innovation, and property market fundamentals. Attracting over 80% of the Venture Capital (VC) investment in the cities analysed, it is no surprise that London, Paris and Berlin are at the top of the ranking. However, what is interesting is that capitals outside of the three core countries (France, UK and Germany) such as Amsterdam, Brussels, Dublin, Stockholm and Warsaw as well as Germany’s second largest city Hamburg and financial centre Frankfurt all rank in the top ten.

The research also found that a quarter (24.8%) of office take up in Stockholm and a fifth of office take up in Brussels (22%) and London’s West End (21%) is now flexible office space. This is followed by Paris CBD (14.8%), Warsaw (12.9%), London City (12%) and Dublin (11%).

Last year flexible office space take-up increased by 20% year on year to reach almost 830,000 sq m across the 20 major European cities monitored. This corresponds to 9.9% of the total take-up levels, when only three years ago this share was below 3%. As take-up of flexible offices continues to grow, it’s the smaller, ‘second cities’ where availability is higher and therefore where we can expect to see most growth.

Looking forward, we expect the popularity of the flexible offices sector to intensify as the sector diversifies its offer. We believe that cities with dynamic economies, which attract innovation and talent can see demand for flexible offices rise up to 15% of the total in the medium term, while in the long term this could increase to 20-25%, especially in periods of economic growth and business investment.

Over the next two years we expect to see the highest expansion of flexible offices in smaller but dynamic markets where availability allows and the share of flexible office space take-up is still below 15%, such as Dublin, Madrid, Barcelona, Bucharest and Lisbon.

You can read the full report here. Or listen to our podcast discussing this topic here.