Serviced Offices: Inc Impact of COVID-19 - UK - November 2020

OVERVIEW
Key issues covered in this report
COVID-19: Market context
Economic and other assumptions
Covered in this Report
EXECUTIVE SUMMARY
Impact of COVID-19 on serviced offices
Figure 1: Short, medium and long term impact of COVID-19 on serviced offices, 15 October 2020
The market
UK serviced offices market enjoys strong growth prior to COVID-19
Figure 2: UK market for serviced offices, 2015-20
Increased adoption of hub-and-spoke model set to drive regional expansion of operators
Start-ups look for flexible ways of working
Figure 3: Number of newly incorporated companies in the UK, 2014-20
Market conditions to remain challenging in short term but strong growth expected to resume post COVID-19
Figure 4: Forecast number of UK serviced offices, 2021-25
Companies and brands
IWG remains largest operator in the UK
Figure 5: UK serviced office providers, by number of locations, 2020
ISSUES AND INSIGHTS
Many companies expected to switch from long leases to flexible serviced offices to help them cope with the financial impact of COVID-19
More traditional property owners and landlords set to enter flexible workspace market
THE MARKET – KEY TAKEAWAYS
COVID-19 to continue to disrupt the market into 2021
Serviced office sector set to benefit from a greater requirement for flexible work spaces post-COVID-19
Demand pivots to more fringe and suburban locations
Creating better collaboration environments and a focus on wellbeing will be more critical than ever post-COVID-19
MARKET SIZE
Introduction
Regional demand for flexible workspaces set to rise, reflecting the trend towards a distributed office portfolio model
Focus on service, multi-functionality and adaptability of space
The customer
Larger companies starting to use flex space
The supplier
Operators incorporate co-working spaces
More landlords set to become a competitor – or partner – to flexible space operators
UK serviced offices market enjoys strong growth prior to COVID-19
Figure 6: UK market for serviced offices, 2016-20
Figure 7: UK market for serviced offices, 2015-20
Regional expansion of flexible workspace operators
Desk prices hold up despite difficult market conditions in 2020
Figure 8: Average workstation rates in key UK cities, 2020
MARKET FORECAST 
Short, medium and long-term impact of COVID-19 on serviced offices sector
Figure 9: Short, medium and long term impact of COVID-19 on serviced offices, 15 October 2020
Lockdown
Re-emergence
Recovery
Market drivers and assumptions
Figure 10: Key drivers affecting Mintel’s market forecast, 2019-2024, (in % annual change and % rate) – (prepared on 13 October 2020)
Market conditions to remain challenging in short term but strong growth expected to resume post COVID-19
Figure 11: Forecast number of UK serviced offices, 2021-25
Figure 12: Forecast number of UK serviced offices, 2021-25
MARKET TRENDS
‘Space as a service’ model
Emergence of specialists and niche players
Demand pivots to more fringe and suburban locations
MARKET DRIVERS
Overview
Trend towards shorter and more flexible office lease structures boosted by COVID-19
Rise in remote working
Figure 13: Percentage of people in employment who mainly work in their own home in the UK, 2015-19
Self-employment levels expected to rise on the back of COVID-19 recession
Figure 14: Self-employed workers in the UK, 2011-19
Start-ups look for flexible ways of working
Figure 15: Number of newly incorporated companies in the UK, Q1 2017-Q2 2020
Figure 16: Number of newly incorporated companies in the UK, 2014-20, (000s)
Figure 17: Business start-ups in the UK, by sector, 2018
Figure 18: Business start-ups in the UK, by region, 2014-18
The rise in a dispersed workforce set to drive regional expansion of operators
Providers must cater for a fully diverse workforce with multifunctional and adaptable spaces
New lease accounting standard to boost demand for flexible workplaces
COMPANIES AND BRANDS – KEY TAKEAWAYS
More landlords set to become a competitor – or partner – to flexible space operators post-COVID-19
Serviced office providers look to regional expansion
Operators that offer pure co-working model hardest hit by COVID-19
INDUSTRY STRUCTURE
Industry development
IWG remains largest operator in the UK
Figure 19: Key players in UK serviced offices market, by number of locations, 2020
Figure 20: UK serviced office providers, by number of locations, 2020
Consolidation and acquisition activity
Trend of traditional property owners and landlords entering flexible workspace market set to be accelerated by COVID-19 crisis
COMPETITIVE STRATEGIES
IWG looks to suburban working boom
BizSpace looks to partner with larger firms to help them transfer to a multi-site model
NewFlex launches new “hybrid office” model as more companies look towards a decentralised office portfolio
Bruntwood Works focuses on creating “offices for the future” and strong customer communication
Citibase launches Citibase Local initiative as part of COVID-19 response
The Argyll Club launches flexible day office option
COMPANY PROFILES
BizSpace
Company strategy
Financial performance
Figure 21: Financial analysis of BizSpace, 2014-18
Bruntwood
Bruntwood Works launches £50 billion refurbishment scheme to created “offices for the future”
Company strategy
Financial performance
Figure 22: Financial analysis of Bruntwood, 2015-19 (£ million)
Citibase
Corporate restructure
Acquisition by Newable in November 2018
Company strategy
New Citibase Local initiative launched as part of COVID-19 response
Financial performance
Figure 23: Financial analysis of CBLH, 2015-19
Landmark Space
Company strategy
Financial performance
Figure 24: Financial analysis of Landmark Space, 2014-18
The Argyll Club (formerly London Executive Offices)
LEO revamps and rebrands business following sale to private investor in 2018
Company strategy
COVID-19 response: The Argyll Club launches flexible day office option
Financial performance
Figure 25: Financial analysis of London Executive Offices, 2014-18
IWG/Regus
Acquisitional activity
IWG opts for franchising strategy to accelerate growth and build scale across the country
IWG plans to open 3,000 sites across the UK
Financial performance
Figure 26: Financial analysis of IWG plc, 2015-19
Figure 27: Geographic turnover analysis of IWG plc, 2018-19
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Methodology
FURTHER SOURCES AND CONTACTS
Trade associations
Flexible Space Association (formerly Business Centre Association)
Trade magazines
Commercial Property Monthly
Estates Gazette
Property Week