As Property Week went to press on Wednesday, the cabinet had just approved the draft Brexit deal. Will this bring greater clarity? Maybe. Maybe not.
Will anyone believe – or care – what is said either way given the topsy-turvy politics that have become the new abnormal? Maybe. Probably not.
On the plus side, so inured has the property industry become to the political chaos that it simply keeps calm and carries on – parts of it are even capitalising on, or at least benefiting from, the uncertain backdrop. Take the co-working and flexible workspace sector. We may struggle to be as footloose and fancy free as we would like when it comes to the terms of Brexit, but when it comes to office space, we have never had it so good.
Flexible workspace fever has gripped the nation. Such is the demand that specialist operators and traditional office landlords alike are desperate to grab a slice of the action.
As we reveal, co-working provider Spaces has ambitious plans to double its number of sites to more than 400 globally in the next year. It only opened three in 2015, so it shows how far it has come – and how savvy Regus, now IWG, was in snapping up the then minnow. Surely IWG wouldn’t be so daft as to offload the brand, as it was recently reported to be considering? Spaces differentiates IWG’s offer and allows it to cater to different demographics, which as the sector evolves could give it a critical advantage over those seen to primarily target only one.
Also on the expansion trail is Fora, which eschews the word ‘co-working’ in favour of ‘pro-working’ and is cannily looking to acquire freeholds rather than leaseholds, reasoning that it is a more robust model when the economic going gets tough.
Meanwhile, co-working juggernaut WeWork is taking yet more space, this time on London’s South Bank, and securing more investment from Softbank in a move that values the group at an eye-watering $42bn, more than double what it was valued at in its last funding round – and despite losses quadrupling to $1.2bn in the first nine months of the year.
Traditional office landlords are not sitting idly by as the specialists park their tanks on their lawns. As we tipped earlier this year, Landsec is launching a flexible offer – it plans to open its first workspace in April and will consider introducing more as leases expire on its existing offices. Not to be outdone, British Land has revealed aspirations to expand its Storey offer to 5% of its overall portfolio over the next five years.
Both are looking to increase their focus on the office sector, Landsec announcing plans to boost its office development pipeline to 2m sq ft and British Land unveiling plans to increase its exposure to 55% to 60% of its portfolio – while slashing its exposure to retail from about 50% to between 30% and 35%. That implies about £2bn of disposals, which won’t be easy to pull off in the current market.
With offices now the hot ticket and retail very much not, don’t be surprised if more landlords start to convert redundant retail units into office rather than residential space, particularly of the co-working variety.
After all, you can’t turn around the fortunes of the high street simply by converting everything to housing…