June 15, 2019 10:00AM

Coworking and Mixed-Use Spaces in the UK

With the growth of the “gig” economy and startup culture, the professional world continues to see shifts including how and where people work. As a result, coworking and mixed-use spaces are increasingly becoming part of the conversation. These types of spaces allow people to blend not only their life and play, but to share access to a building, meeting rooms, and other accommodations with workers from different businesses. Popular common spaces include WeWork, Techspace, and Impact Hub, to name a few, but the UK’s coworking market has been active before many of these well known spaces entered the market. In 2018, 2,188 new coworking spaces joined the fold, and that number is expected to grow in 2020, especially for cities like London. Here’s a look at why these spaces are growing and their impact on property owners and tenants.

For the UK, and more specifically, London, coworking and mixed-use spaces are booming. Many coworking spaces offer businesses more flexibility and less risk to quickly scale up or down. Additionally, the blend of office space with amenities such as restaurants, as well as better commuting options and more community connection, including niche group spaces, benefit both businesses and workers. 

A summary of the 2018 Global Coworking Survey results, presented at GCUC UK, shows that on average, coworking spaces in the UK host 121 members, up from 102 last year (+19%) and +81% in 2016. With this, the number of desks and size have also increased from 109 desks (+87%) and 15100 square feet (+81%) than the previous year. coworking spaces still focus on classic target groups: 1 in 10 coworking spaces target companies with 10 to 99 employees, and 1 in 20 target companies with 100 or more employees. UK mixed-use property owners focus on micro-companies is higher than the global average.

How the U.S. Differs from the UK in Mixed-Use Development 

While London still leads the pack in many ways, in 2018, of the aforementioned 2,188 new coworking spaces entering the market, 1,000 of those were in the United States. According to a Yardi Matrix report, coworking spaces grew almost 62% in the top 20 office markets in the U.S. from 2017 to 2018. Similar to the UK, the growth of the “gig” economy and the growing number of startups continues to pull people in the US towards these nontraditional office solutions. Since these spaces cover essentials from wireless internet to printing solutions and quick accessibility to restaurants, businesses can focus more on their larger strategic goals. 

Do the Benefits Outweigh the Issues Property Owners May Face?

For commercial property owners, there are benefits to owning a coworking or mix-spaced over a residential property. Traditionally, the yields are higher and the leases are longer, with five years being typical and 15 common. In many cases, the landlord owns the freehold, allowing them freedom from maintenance or a property manager. However, market concerns around valuations makes financing these developments harder to come by.  And investors continue to question the long term profitability of these spaces; in self-reported data from Deskmag’s 2017 Global Co-working Survey, only 40 percent of all co-working spaces were profitable. 

While having a mixed-use building means landlords are investing in not only the tenant, but also the tenant’s business, especially with shifts in what trades are successful, the investment in these properties continues to grow. The benefits of a mixed-use property allow tenants quick access to amenities without commuting, and business owners have more foot traffic than they would in a single-use commercial building. Whether you are already investing or thinking about investing, the co-working trend is one that is likely to stick around.

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Rob Crichlow
About the Author

Rob Crichlow

Rob comes to us with tremendous experience spanning a 40 year career in real estate technology.   Rob began his career by launching a firm focused on developing accounting software for real estate firms.  His software, Real Estate Computer Systems, Inc., was eventually sold to MRI as the genesis for the DOS product.  Rob joined MRI at that time …