Managed flexible office space – a solid solution but not always a quick fix

Over the past five years we’ve seen significant growth in the share of managed flexible space in the UK office market, which has predominantly been fueled by landlords recognising an opportunity to increase the tenant mix in some buildings, lease smaller spaces in their portfolios that may not lend themselves to traditional office layouts and, over time, secure multiple lettings from the same space for the same fit-out costs, barring some small refurbishments.

By offering managed space, landlords can often engage with a new type of tenant that may be looking to take the next step to expand out of serviced offices, and/or prefers a more flexible, hospitality-led and productised type of environment. In addition, we have also seen some large corporate organisations taking some flexible managed space on a smaller scale as part of their hybrid-working solution; providing smaller but better quality areas to encourage staff to return to the office. 

How do tenants benefit from managed space?  

For tenants, managed space offers greater leaser flexibility, minimising the liabilities that may come from taking on a longer-lease, while enabling them to enjoy a high-quality specification, their own front door and an opportunity to stamp their own culture on a space, with no big upfront costs in terms of fit-out or dilapidations bills on exit. While these benefits do tend to come at a premium, many small or high-growth companies are willing to pay the additional costs in order to have the peace of mind that comes with knowing someone else is running the building, allowing them to focus on their business. 

Increased competition means attention to detail is key  

Even in a relatively short space of time the managed space market has evolved. It was originally was considered that most vacant offices could potentially become a managed flexible space, however increased competition and demand for a high-quality tenant experience means that only offices that meet certain a criteria are likely to attract tenants looking for the full managed space experience. In order to work properly for landlord and tenants alike, managed flex space needs to be fully considered and carefully planned before delivery with key areas of focus being: 

• Location: where your space is located is crucial given local supply/demand levels and rental return dynamics. Some markets, especially sub-markets in London, have a clear ceiling on managed and serviced flex office space pricing. Investing in a high spec fit-out or operational costs may be fruitless if your location means you’re unlikely to make this back in rent. 
• Appearance: as noted above, competition is fierce in the managed flex space market, so a good quality fit-out and a well-dressed ‘show’ floor is important, with an emphasis on providing solid IT, good coffee and an impressive entrance experience to tenants and their clients. 
• Space mix: providing a mix of office sizes will help to ensure a good level of traction and footfall from tenants, and the opportunity for the building to offer something for all tenants throughout their growth journey from coworking to a small serviced office through to a large enterprise, managed space.
• Amenity: consider the what else can be provided. Many tenants will be looking at what a space offers that  can be used to attract their employees in, so consider if gyms, F&B offerings, and outdoor spaces can be provided.  

The managed space offer is an established solution within the suite of flex office alongside private desks, coworking, serviced offices and fitted space. Given its growing popularity over recent years, we expect it to continue to appeal to landlords and occupiers alike, although it is important to recognise that it is not always a quick fix for any space that has struggled to lease.