Leasing to coworking operators across the Big Six regional cities reached the highest level as a percentage of all leasing for more than a year in the second quarter of 2022.
Coworking take-up represented 8% of all activity in the key regional cities of Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester, the highest since a raft of deals were agreed in the first quarter last year, and the second-highest for three years.
Manchester and Bristol dominated the second quarter activity, but most cities have seen co-working lettings this year.
With the withdrawal of WeWork from the market and little activity this year from larger providers such as Regus, Spaces and Instant, most activity has come from relatively new operators, such as Newflex, X+Why, 2-work and Cubo.
In Manchester, NewFlex took 25,000 square feet at Exchange Quay, following its first deal last year at Quay Street. Similarly, X+Why agreed a management agreement on 28,600 square feet at 100 Embankment, following acquisitions in London and Birmingham in 2021.
In Bristol, Runway East and Desklodge agreed their first transactions in the city before the pandemic, but both continue to expand. Runway East took a 16,000 square feet at One Victoria in June and Desklodge has expanded its occupation by 18,000 square feet at the Beacon Tower.
Flexible workspace operators, a strong driver of demand before the pandemic, re-entered the market last year amid increasing demand among firms for greater flexibility.
Since then, Manchester has seen 350,000 square feet of leases, including two recent third quarter deals totalling 46,000 square feet to Orega. Leeds is next with over 130,000 square feet of activity, as companies have been attracted by its growing reputation as a start-up and tech hub. Last year Instant, Inspaces, HUB26, Cubo and Wizu all took space in the city, with 2-work the latest, taking 13,000 square feet at 27 King Street in March.
As businesses are prioritising agility, they are increasingly using flexible workspace to trial hybrid working. According to Instant’s latest report, flexible workstation rates have increased in most cities over the past six months, with double-digit growth in Leeds and Edinburgh. Coworking operators are benefitting from occupiers’ desire for well-located, better-quality space, rich in amenities that will attract the right talent. The high occupancy rates will also help companies to achieve their sustainability commitments.
Flexible workspace operators will continue to gain from the structural changes to the office market. The pandemic has accelerated that change and the coworking market is expected to benefit from the economic downturn as it has in the past, as businesses are less prepared to take on long-term commitments.
As coworking matures, strong growth is projected in the long term, with some forecasts estimating that it will represent 30% of the market by 2030.