UK landlords jump on WeWork flexible office bandwagon
When UK property company British Land created a flexible office brand last year, it opted not to include the perks offered by fast-growing rivals such as WeWork. “We are aiming at a more grown-up business [as a typical tenant] . . . that wants a more sophisticated, mature offer, that does not include ping-pong tables and free beer,” said Tim Roberts, head of offices at British Land. But like WeWork, British Land has realised flexible offices are big business: more than a year on, it is earning a 48 per cent net rent premium on its flexible leases — which are typically short term and include services such as cleaning and WiFi — compared with traditional lease deals. The rise of WeWork and competitors such as The Office Group and IWG, which lease large spaces from landlords then let them out to smaller tenants on flexible contracts, has prompted property owners to seek out the attractive profit margins that are available for themselves. Since British Land set up its Storey brand, a number of other established UK landlords have followed in its wake. Landlords are also responding to demand from small businesses, which have begun to avoid traditional leases, and from larger ones seeking extra space on a flexible basis for growth or special projects. Another draw for tenants is the simplicity of the inclusive contracts. British Land’s experiment, shortly to expand to 300,000 square feet, has gone so well that it says it will no longer let new space to WeWork or other competitors. Instead, it will expand Storey to as much as 10 per cent of its £9bn office portfolio, and has begun buying buildings specifically for its use. Read more here.
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