Five themes impacting European flex offices

Flex offices are undergoing a resurgence in demand throughout Europe. Savills highlights the five major trends impacting the sector. 

1. Average conventional lease lengths are becoming shorter. Given rising economic uncertainty and business costs, occupiers are seeking more flexibility in their lease structure. Although prime European lease lengths have remained stable, average lease lengths have fallen by an average of 20% since 2019. When searching for new premises up to a fixed quota of desks, many global occupiers are now opting for flex space as a first port of call to streamline their office portfolio. 

2. Contract occupancy rates remain stable. Workthere’s 2023 Flexmark indicates that average flex office contract occupancy rates held stable YoY at 83%, above the 80% mark that indicates operators are seeking to expand. For example, IWG opened 306 new locations during H1 2024, up from 133 new openings in H1 2023, whilst Industrious, Morning and B.Amsterdam also signed for new space across Europe. We are also observing more luxury operators enter the market, unlocking premium quality, locations and services, which have even included private, Michelin-starred restaurants.  

3. Desk costs across Europe are increasing. Average desks costs across Europe’s capital cities rose by an average of 6% over the past 12 months, led by London (+12%), Warsaw (+10%) and Berlin (+8%). In comparison, conventional office rents rose by an average of 2.4% over the same period, as customers become more willing to pay a flex premium for ease of taking space. 

4. Flex operators are accounting for a higher proportion of the conventional leasing market. Flex offices accounted for 5% of the European office leasing market in H1 2024, up from 4% in H1 2023. London remained the most active market given the longer average prime lease lengths, followed by Amsterdam and Paris CBD. Workthere data indicates H1 2024 customer enquiries are up 14% YoY, as increased demand for amenities is making the workplace more labour-intensive and creating opportunities for operators to step in. 

5. Management agreements and landlord fitted space are becoming more popular. Savills latest European Investor Sentiment Survey indicates that 15% of investors are seeking to increase their exposure to flex offices through landlord fitted space and 12% through management agreements, over the next 12 months. Landlords are becoming more comfortable in entering a profit-share agreement with operators, reducing operators’ risk, and providing a upside reward for the landlord. More traditional landlords are also seeking to provide managed space solutions, where the tenant has private facilities, chooses their own fitout, and is more easily able to promote their own brand, with leases usually between one and five years.  

It’s clear that the lines between conventional and flex offices are blurring, as office users seek more flexible terms, more personalised space and enhanced amenity provision and landlords provide new solutions. More landlords will seek to implement managed space as part of their portfolio, targeting businesses who seek a flexible, long-term, self-contained workspace without operational hassle.