Strong VC investment into UK start-ups supports flex office take-up

In line with a surge in Venture Capital (VC) investment into start-up companies in the UK, the flexible office sector has reported a correlated growth in take-up with figures at the end of H124 reflecting the highest level at this point of the year since 2019 and 39% above H1 2023, reaching 642,000 sq ft, according to Savills and its flexible office specialist Workthere.   

Following its analysis of VC investment, where the recipient UK-headquartered company has a ‘start-up’ status, the international real advisor found that 2023 volumes reached approximately £784 million (£223 million in London and £456 million in the rest of the UK), which is the highest level of investment in a decade. Savills reports that the 2024 VC investment figures into start-ups are already look strong with £123 million invested in London and £239 million in the rest of the UK, equating to a total of £362 million as at the end of August, which is also considerably up on the figures over the last 10 years.  

In terms of sectors, the analysis shows that Entertainment Software, driven by AI growth, is the clear favourite in 2024 accounting for £57 million so far with Business / Productivity Software (£53m) and Biotechnology (£39m) ranking in second and third, respectively. These three sectors account for nearly 40% of total VC raised by start-ups in 2024, to date. 

Simon Preece, commercial research analyst at Savills, comments:

“VC investment is integral to those start-ups businesses looking to grow in terms of turnover, headcount and expansion. It is in these latter categories in particular where we often see a link to the flexible office market, as it is usually this space that provides a starting point for many start-ups, and indeed offers an environment for them to scale on flexible terms. It is therefore no surprise to see a surge in VC investment into start-ups correlate with a rise in flexible office take-ups from providers and operators cross the UK.”  

Tom Leahy, co-head of Workthere, says:

“With investment into start-ups this year already looking strong against the spike in 2023, we would expect this to continue to translate into robust take-up activity in the flex sector, which combined with an increase in enterprise deals from larger corporate occupiers who are seeking to increase to proportion of their real estate portfolio into flex space, presents a strong case for continued growth in the flex sector.  

“Across our managed office portfolio we have seen continued year-on-year transaction volumes from start-up and growth companies as they drive towards acquiring their own self-contained space that is of a high-quality whilst retaining flexible terms and a hospitality-led service.” 

Savills and Workthere highlight that, along with continued appeal from VC investors into start-up companies in 2024, there has also been a notable growth in the share of earlier seed stage investment.  Of the overall VC raised so far this year, £122 million has been at this seed stage and accounts for a 36% share. This compares to the five and 10-year averages of 26% and 22%, respectively. This is a further positive sign for flexible office space who often provide a first desk / office at this stage of a business’s growth.