The traditional office leasing landscape in London is experiencing a significant transformation as major landlords pivot towards offering fully managed, amenity-rich workspaces. This shift reflects the growing demand for flexible office solutions in the post-pandemic era.
Great Portland Estates (GPE) exemplifies this trend with their recent £30 million acquisition of 6 St Andrew Street in central London. The property showcases a complete departure from conventional empty office spaces, featuring pre-fitted desks, carefully curated breakout areas, and thoughtfully arranged botanical elements throughout the building.
The evolution extends beyond mere aesthetics, with GPE managing everything from reception services to WiFi connectivity, while also providing luxury amenities such as yoga studios and communal kitchen spaces. Nick Sanderson, GPE’s chief financial and operating officer, emphasises their customer-centric approach, noting they’ve even banned the term ‘tenant’ in favour of ‘customer’.
Current market data indicates that flexible spaces now constitute 10% of central London’s office market, marking a substantial increase from 6% in 2019. GPE plans to expand its flexible portfolio to 1 million square feet, representing 40% of their office holdings.
Major property players including Derwent, British Land, Land Securities, Canary Wharf Group, and the Grosvenor estate are following suit, offering increased flexible office solutions. These spaces typically accommodate 50 to 100 desks with shorter lease terms averaging two years.
The financial implications are significant, with GPE targeting a 50% premium on rents for fully managed spaces compared to conventional offices. Their St Andrew Street property commands £200 per square foot, reflecting the premium market positioning of these enhanced office solutions.
While the trend shows promising growth, industry analysts note potential risks due to limited performance data and the possibility of increased competition affecting premium rates. However, with 77% of west end office lettings for smaller tenants now being flexible arrangements, the market appears to be firmly established in this new direction.
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