Not just for start-ups! How the flexible office market has diversified its client base

For a long time when we talked about co-working or serviced office space we associated them with the start-up community, and whilst these occupiers still form a large part of the client base for operators, the demand for flexible office space has become far more diverse over recent years.

The natural progression for a start-up as they expand and raise funds is to become a scale-up, and as the number of start-ups begins to increase, so too does the number of them maturing onto the next stage of their journey. It is, therefore, no surprise to see that scale-ups are beginning to take the lead in terms of occupancy dominance. This is a trend we expect to increase particularly given that, according to Google search terms, the phrase ‘how to set up a business’ saw the highest all-time number of searches in August 2020, indicating that there will be no shortage of start-ups looking to set out on their growth journey.

Small Medium Enterprises (SMEs) are also often associated with the scale-up community and are most certainly a sector to watch as we move forward with a number of professional services firms and companies that may previously have favoured the traditional leasing market, looking for more flexibility within their portfolios. We are also seeing a similar story unfold with corporate businesses who are using flexible office space to add something different and more agile for their workforce as we enter a period of what is expected to be a hybrid working pattern. As a result, it is becoming increasingly common for large corporates to have an element of flexible office space within their portfolio whether it be more localised hubs, project teams or swing space whilst corporate strategies can be undertaken.

When we break this down further and look into specific sectors our Flexmark research shows that business products & services account for the highest level of occupancy in flexible office space at 29% followed closely by consumer products & services at 26% and tech at 19%. This is not necessarily surprising given that they cover a wide variety of businesses and also vary greatly in the size of the business within each sector. Whilst the healthcare / medical and financial sectors are currently relatively low in terms of occupancy, they are both areas where we expect to see significant growth over the next couple of years. Financial services companies, in particular, have traditionally been based in specific locations on traditional, longer leases however, we are now seeing these companies looking for either more flexibility either partially or wholly to a flexible workspace offering.

So how has this more diversified occupancy base impacted the average member lifespan over the last 12 months? The main change has been the influence of corporates taking space as these occupiers, who often have more stable staff numbers, want to commit to the largest spaces on longer commitments.

The UK holds the longest average member lifespan over the last year of 21 months, although it will be interesting to see how this number changes over the next one to three years as we see an increase in companies accepting flexible offerings as more commonplace. This could either reduce the average terms as a greater number of smaller businesses bring the number down or it could potentially increase as more corporates and SME activity generates commitment on longer terms. It is certainly going to be a key indicator to show the acceptance of flexible workspace as well as following the European and US markets to see if this trend follows on.