Landlord sentiment towards flex space rises as demand for flexibility continues to grow, says Savills

According to Savills latest Landlord Flex Survey*, the positive sentiment towards flexible workspace has continued with 67% of respondents expecting tenants to require more flexible lease terms going forward. 52% of landlords were optimistic on the long-term prospects of the flexible office sector, up from 46% in 2022.  

Cal Lee, Global head of Workthere & Co-head of Savills Flex, says:

“There is a growing trend of landlords recognising flexible office space as a part of the amenity offering in a building that can help support its overall leasing performance. As the demand for flex space continues to rise, we are seeing an increasing number of landlords accommodating this trend by dedicating more of their building space to the provision of flex space and the associated amenity it offers occupiers.” 

According to the survey, the inclination of landlords to let larger quantities of space to flex operators has risen. This is indicated by 31% of landlords who were willing to let more than 25% of a 50,000 sq ft hypothetical building to a serviced office provider, whereas, this was 10% in 2022. This trend is reflected in the average letting size to a flexible office operator since the start of 2021 totalling 21,000 sq ft. 

The survey also shows the growing trend of landlords willing to explore management agreements with operators, with 54% of landlords either neutral or open to considering a management agreement with a flex operator, which was marginally above the 53% proportion from the 2022 survey. The improving sentiment from landlords towards management agreements is notable when reviewing the proportion who are definitely not open, this was 3% in the 2023 survey whereas it was 21% in the 2020 survey.  

Simon Preece, commercial research analyst at Savills, says:

“Over the last few years, we have seen landlords becoming more comfortable with management agreements, which are generally favoured by flex office operators as they allow an element of risk sharing. We expect that these types of agreements will continue to grow in popularity as we move forwards.” 

Savills reveals that the ongoing desire for more flexibility from tenants has resulted in an increase in the quantum of space that tenants require. 41% of landlords stated that the most common size requirement is over 2,500 sq ft whereas, in the 2022 Landlord Flex Survey, the most common size requirement was between 500 and 2,500 sq ft accounting for 73% of responses from landlords. 13% of landlords stated the typical flex size unit was over 5,000 sq ft which further highlights the increasing demand for flexibility from larger tenants.