Secondary European cities see biggest growth in serviced offices

Birmingham, Frankfurt and Dublin have seen the sharpest increases in take up by serviced office providers in the first quarter of 2017, according to  Savills new European serviced offices report.

Serviced office providers accounted for 25% of total take up by volume in Birmingham in Q1 2017 compared to 2016 when no transactions were recorded, while in Frankfurt their share of the market rose from 0.5% in 2016 to 7.5% in and Dublin it went from 1.7% to 7% in the same period. London is still the leading city globally in terms of serviced office space with over 1,100 different locations and providers in the sector accounting for 7% of total take-up in Q1 2017, according to Savills.

Take-up by serviced office operators could climb up to around 5% of all office space taken across Europe by the end of 2017, says Savills, as operators seek to meet demand. While major UK and European cities are likely to see the highest levels of space taken, boosted by growing tech companies, start ups, and larger corporates looking to second divisions into serviced offices to benefit from the collaborative culture on offer, in the long term Savills says that future demand for serviced offices may be in more "peripheral" cities and locations.

Matthew Fitzgerald, director, Savills European tenant representation team, comments: “The expansion of the tech sector in particular is one of the key drivers in the growth of serviced office space. We’ve therefore examined where new start-ups are emerging to predict where the greatest growth in serviced space is likely to be. For instance, there were around 2,700 new start-ups in Poland last year, which is expected to lead to a strong future demand for flexible office space.”

Savills cites Krakow, a hub for beacon technology, Lisbon and Barcelona, with their strong cultures of co-working, Belfast, where take up by serviced office operators is expected to grow by 10-15% per year over the next five years, and Prague, with its focus on cybersecurity, as markets likely to see a surge in both demand and provision of serviced office space in the near future.

Mat Oakley, head of UK and European commercial research at Savills, adds: “While business growth is the driving force behind most lettings, inflexible lease terms and a lack of conventional office space are also leading to occupiers moving to serviced offices. With continued political and economic instability, some occupiers do not want to get tied into long-term leases, instead seeking to be agile and expand or downsize as required. Vacancy rates for grade A office space in the majority of Europe’s central business districts are also currently below 5%, with a shortage of modern small sized offices suitable for start ups and small businesses, giving occupiers few options but to move into serviced offices.”

View Savills European serviced offices report here.