The growth in the UK flexible office sector over the past 10 years has been phenomenal and I can only see demand accelerating as the appetite for the short-term contract grows.
Not only does this type of work environment remove the lengthy financial commitment, it is also the preferred option for firms seeking to concentrate on their own business activities and leave the peripherals - such as reception, IT, cleaning and maintenance - to someone else.
I believe Brexit will give added impetus to the workspace revolution. The ‘leave’ vote lightning bolt to the UK employment market has fast-tracked the realisation for thousands of businesses that flexibility is the key to success and that traditional long-term leases are a thing of the past.
The out vote has created a completely new way of thinking, where every decision is questioned - and if you think Brexit has caused uncertainty, just imagine what a Donald Trump presidency would do!
More than 90% of firms have told us they do not want long leases as they crave agility over stability - the average length of lease is now 4.5 years, down from 21 in 1991. Figures from Citibase back this up - take-up grew massively for short-term contracts in the period leading up to and after the referendum.
In May, June and July, Citibase saw the largest volume of business across its UK portfolio in nearly a quarter-century of trading, with the value of contracts signed up 50%.
Since the Brexit vote, we have been approached by numerous landlords with under-used office buildings. Many property owners are scratching their heads - they cannot find the tenants willing to sign for the long term. “The world of work has changed forever” is a mantra I’ve been reciting for some time now and many enlightened landlords are now waking up to the benefits of having flexible occupiers in their buildings.
Citibase is helping landlords reap the rewards as they understand that there are hundreds of thousands of cost-conscious SMEs in the UK who don’t want to take long leases.
Flexible working space is crucial
Businesses do not know how they will develop in the future and we have seen many SMEs grow rapidly in a very short space of time. Start-ups whose initial requirements will be for a small amount of space can quickly evolve and require a larger working environment.
This is when flexible working is crucial - it could be crippling for a small business if it is tied down to a long-term contract in a space that has become unsuitable.
If all this isn’t enough proof that agility and flexibility are now the norm, in accounting terms, leasing is currently treated as an off-balance sheet activity, having no impact on net assets. From 2019, however, changes in accounting requirements will mean that rent and lease payments will have to be listed on balance sheets, increasing a company’s liabilities.
Firms will have to look for new, inventive ways to save money and reduce liabilities - but how? You’ve guessed it - flexible office providers are the knights in shining armour thanks to their agility and cost‑effectiveness, which will help them lead the way in a post‑Brexit world.
Steve Jude is CEO of Citibase