Co-working has become a worldwide trend, which is challenging conventional thinking about the workplace.

In fact, the rise of the flexible workplace was one of the driving factors of positive office performance in 2018, particularly in Central London, according to research from commercial property agents Cushman & Wakefield1.

Across the capital, flexible workplaces account for nearly 20% of office space, while competition in regional cities is intensifying. Take-up in the UK’s largest cities outside of London jumped from 2% of all leases in 2016 to 7.5% in 2017, powered by the growth of co-working offerings from companies such as WeWork and International Workplace group's (IWG) co-working format, Spaces.

The rise of shared workspaces

WeWork's success has been in its ability to harness the appetite that exists for co-working in an effective way, reinventing the office rental market as a community of freelancers, entrepreneurs and business people. Its model means that you can have two or more completely different kinds of businesses working within one building, side by side, on the same floor. Businesses may be as contrasting as fast food chain Pizza Hut and the construction company Skanska, for instance.

Furthermore, it has tapped into the desire to have a one-stop shop for property. After people, the biggest cost to business is property and property is usually a fixed cost. WeWork has connected to a market with a huge demand for variable prices when it comes to managing property costs.

It has done so by offering a membership model on an annual, monthly and premium basis, which gives flexibility – just like many gyms do.

Another trend that has driven success of co-working spaces is the rise in the number of self-employed workers. The Office for National Statistics records that the rapid growth of self-employment has been a pronounced feature of the UK labour market in recent years, with the numbers increasing from 3.3 million people (12% of the labour force) in 2001 to 4.8 million (15% of the labour force) in 2017.

Within this, WeWork has tapped into a younger, tech-savvy audience, appealing to both this group and upcoming generations by building a unique brand and proposition.

Expanding to meet market demand

WeWork is the biggest tenant in London. Cushman & Wakefield's research found the company has become the largest occupant of space in the capital over the past five years, with 2,578,000 sq ft of space since 2012.

This places it ahead of Google (1,344,000 sq ft), Amazon (1,013,000 sq ft), Deutsche Bank (858,000 sq ft) and fellow flexible office providers The Office Group (853,000 sq ft) and Regus (512,000 sq ft).

Its expansion has been so rapid that WeWork now has the largest volume of office space commitments in London, second only to the UK Government.

What’s more, the £20 billion business is planning to double the number of desks in London this year. Because it is the largest tenant in London, that will pose a problem for landlords because it gives WeWork tremendous power over them.

Its success in the office sector has propelled the New York City-headquartered company to build on that by diversifying into dorm-like 'We Live' apartments, luxury holistic gyms within their co-working spaces and even a private elementary school.

As the business has thrived, however, landlords have sought to counter its dominance. Land Securities and British Land have now launched their own co-working spaces. The rationale being that they do not want WeWork to become too dominant in the market because then it will be dictating lease terms to them rather than vice versa.

There has also been an emergence of co-working spaces in secondary markets by independent operators. For example, in Huddersfield and Bolton there are small players with WeWork-style concepts. A trend that is only likely to grow.

International growth

Despite boasting an annual revenue of around USD 1.8 billion, WeWork reported net losses of USD 723 million in the first six months of 2018.

In contrast, London-listed IWG earned £54 million (USD 69 million) pre-tax in that same timeframe, with trailing 12-month revenue of £2.4 billion (USD 3.1 billion). And Spaces is looking to increase its global offering. It opened 45 new locations in the first half of 2018, increasing its footprint to 1,500,000 sq ft across 124 locations.

A number of mergers and acquisitions in the sector indicate that businesses expect the appetite for such spaces to continue.

Notable transactions in 2018 include a management buyout of The Instant Group, UK-based brokers of temporary and serviced office spaces, which will enable it to scale its Instant Offices business internationally. This was achieved together with Bowmark Capital LLP and MML Capital Partners LLP. With a workforce of 250 employees around the world in 11 cities, the group has recorded a compound annual revenue growth of around 30% in four years.

Similarly, UK-based office broker Flexioffices aims to accelerate international growth and drive, with continued development of its technology, following a management buyout.

A joint venture with Marechale Capital and Bluehone Investors led by Office Space has acquired Burgh Island Hotel. This acquisition will enable Office Space to expand its portfolio in hotel business, with clients benefiting from discounts for corporate events such as annual general meetings and shareholder meetings.

WeWork Management also acquired LT Build Holdings, a London-based office design services provider.


The workplace is in a state of evolution, with customers increasingly valuing flexibility over traditional, long-term leases. The changing needs of start-ups and SMEs underpin the economic growth drivers that have led to an exponential rising growth for shared workspace operators such as WeWork. As millennials flock to major cities and a generational shift forces corporates to embrace a flexible working culture, we anticipate further growth in the co-working subsector.

The changing views about our work and life balance will influence workspace design and interaction, be it building location, amenity provision or workplace planning. We see technology as an enabler for change.

While growth from this sector has been rapid, the co-working industry is still in its infancy. The growing importance of flexibility will drive the rise in new workspace operators and force existing operators to update traditional business models. In turn, we anticipate further M&A activity in this sector as companies look to accelerate their regional footprint through consolidation, capitalise from disruptive tech-enabled business models and protect existing tenant relationships.

The flexible workplace is here to stay and, as generational shifts impact the industry, the co-working subsector will continue to be a major influence on the future direction of the UK and International office market.

Our corporate finance team has advised multiple transactions in this space. To discuss how we can help you contact Usman Malik.


1 Coworking 2018 - The flexible workplace evolves, Cushman & Wakefield, 2018

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