The rise is due to small-to-medium businesses avoiding costly and burdensome leases in favour of more flexible and creative offices. The serviced office market has grown by 67 per cent in the past decade, comprising five million square feet across central London, according to research by Deloitte Real Estate.
“This significant increase in coverage highlights how important serviced offices have become, not just to occupiers but the wider office market. We are seeing, and will continue to see, the proliferation of these spaces across London for small and medium businesses,” said Chris Lewis, head of tenant representation at Deloitte.
The City is the area of the capital with the highest proportion of temporary workspaces with 34 per cent (1.7m sq ft) of the market. Deloitte believes this is partly due to financial technology firms wanting their sales teams to be closer to clients.
The West End has a 28 per cent share of the market. Other areas like Docklands and E1, including Spitalfields, Shadwell and Stepney, have fewer temporary workspaces but have seen sharp increases of 350 and 250 per cent in the past decade.
“The change in occupiers' needs over the coming years will see serviced offices and co-working space move higher up the attraction scale. Not just occupiers, but landlords and developers are showing more willingness to incorporate such space,” said Lewis.
More firms are now providing serviced offices with 80 providers offering this service, an increase of a quarter from 2004.
Vacancy levels are heading towards crunch point
“The landscape has shifted now in that flexible offices, with one single cost, offer a value proposition as businesses focus on their space needs within their individual offices,” said Charlie Green, Co-CEO of The Office Group.
The rise in the number of temporary workspaces comes as office vacancy rates within the M25 area reached their lowest since 2001. Availability has fallen to 5.9 per cent across all types of office space in the first quarter of 2015 according to Knight Frank, the global real estate consultancy.
“Vacancy levels are heading towards crunch point in combination with the market seeing rental growth across a growing number of key centres. In some cases rents are now at an all-time high – motivation for occupiers to identify and secure the best space now,” said Emma Goodford, head of National Offices Leasing Team at Knight Frank.