Property Week – 28 June 2019
Editor: Scotland’s flexible workspace sector is expanding fast driven by demand that is growing by at least 25% annually in all major cities. It should come as little surprise that flexible workspace operators are looking to establish bases in Scotland’s major cities. Those cities are lively business centres and Glasgow, in particular, is thriving. It is the top financial services location in the UK outside London and is the most highly skilled large city in the UK outside London. Graduates make up 46.3% of the workforce, well above the figure for most major cities in the UK. Glasgow has also seen the third highest level of commercial property investment in the UK in the past decade.
As GKRE’s own analysis of the market in Glasgow reveals, a lack of speculative development has seen rents rise amid an acute shortage of Grade A stock. This has been good news for flexible workspace operators who have stepped in to help fill the void and provide occupiers with the flexibility they now demand.
National operators Regus, Spaces, Landmark and Orega, as well as a number of local independents, all have a presence in Glasgow and we believe more operators will join them in the months ahead.
Property owners are also increasingly looking to enter the flexible workspace sector and many are embracing joint venture management agreements with operators. Such agreements give property owners a way into the fastest growing market in commercial property, while allowing them to utilise the expertise of an experienced operator.
A recent example is that of Orega, which took 29,929 sq ft at 9 George Square on a 10-year management agreement from the building’s owner, EPIC. The deal enables Orega to operate a centre in one of Glasgow’s most prestigious locations and allows EPIC to get involved in the flexible workspace sector.
Over the next few years we anticipate more and more landlords will partner with operators through such management agreements as the flexible workspace market continues its phenomenal growth. Property owners now realise that such agreements offer the potential to generate income far in excess of ERV, and allow them to keep ‘ownership’ of their tenants and incubate them for future lettings.
Will Kinnear, director GKRE