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Spaces Mappin HouseWith Regus buying Avanta, we look at what this means for the sector and where the industry is heading

As you may have seen Regus has bought rival operator Avanta. It gives them a network of 320 locations across 50 UK cities, with more than 100 centres in Greater London.

Property Week described the deal as being part of Regus’s bid “to corner an increasingly busy market”. It is easy to see it that way when you consider how many operators Regus has gobbled up over the past few years including Evans Easy Space, Abbey Business Centres, MWB Business Exchange and Forsyth Business Centres, to name but a few.

What’s interesting though is that this attempt to “corner the market” is coinciding with a revolutionary change in the sector. All of the acquisitions mentioned are of what have been dubbed “traditional hallway-heavy serviced offices”.

But as Cushman & Wakefield point out in their recent Capital Watch Q1 review, the sector is going through a major transformation, especially in London. Regus’s domination of the traditional market has opened up opportunities for a new type of occupation that includes co-working and business lounges. In the US this is type of offering is called OaaS, Offices as a Service, and although this name hasn’t yet caught on here, the type of occupation it represents has.

WeWorkOperators such as WeWork, The Office Group and Second Home offer more than just office space. Their centres give occupiers a place to network and share ideas in a supportive community. Whilst this type of space has initially been popular among tech companies, creatives and start-ups, it is now proving attractive to occupiers across all sectors.

This isn’t to suggest that this new type of space is going to overtake the traditional serviced office, at least overnight. There is 8.6m sq. ft. of flexible office space in central London, the vast majority of which follows the traditional model.

But this is changing. The Office Group has recently taken 50,000 sq. ft. in Singer Street, EC2, 66,000 sq.ft. in Langham Place, W1 and 30,000 sq.ft. in The Shard. New York-based operator NeueHouse has taken 60,000 sq.ft. in The Adelphi Building, John Adam Street, WC2. In addition, WeWork has announced plans to acquire a further 500,000 sq. ft. over eight new London sites.

As usual, where London leads, the rest of the UK is likely to follow. According to the Serviced Office Review 2015 by The Instant Group, 30% of the UK’s serviced office market is in Greater London. We expect to see more co-working and business lounge style space springing up all over the rest of the country in the next few years. At present serviced offices represent only 5% of UK office stock, so there is plenty of scope for growth in this area.

As you might expect, Regus has not been slow to pick up on this new trend. In 2014 they acquired a Dutch company, Spaces, and are set to open their first Spaces London in Oxford Street, W1 this July. Regus haven’t called this co-working but that is what it is in all but name. They talk about ‘workspace where clients can work in an energetic, entrepreneurial environment surrounded by like-minded people’ and ‘hosting business and networking events to encourage members to share and participate in the Spaces community’.

With a host of well-funded rivals and new co-working space springing up all over the capital, there is no sign of Regus cornering this expanding market too, at least for the time being.

Let us know your thoughts on the future of the serviced office industry by emailing us at info@gkre.co.uk