Lambert Smith Hampton has just published its statistics for the 2018 South Coast office market and the results show (for the fourth year running) a reduction in office take-up.
However these figures only represent transactions for space over 2,500 sq ft. This does not therefore tell the story of the consistent growth of small and medium-sized enterprises (SMEs) on the South Coast, a feature which is very much echoed throughout the UK and the rest of the world.
Figures from the federation of small businesses (FSB) suggest there were 5.6 million small businesses in the UK at the start of 2018. This represents a 63% increases (2.2 million) since 2000. SME’s represent an incredible 60% of all employment and 52% of turnover in the private sector.
To put this growth into context at a local level, figures from the office for national statistics (ONS) show that the total number of micro businesses (0-9 employees) in Southampton has grown by 27% in the past five years (2014-2018). The increase in new business start-ups in Southampton has even been highlighted as a significant factor in the city being ranked the third highest city in the UK for “Good Growth” by the PWC Good Growth for Cities 2018 Index.
These SME’s and indeed the next generation of workforce are increasingly demanding inspiring workspaces from which to trade and this demand is delivering rapid growth but also an evolution of not just coworking space but office space in general.
While around two-thirds of coworking space in the UK is targeted towards the micro-business market, we are now also experiencing an increase in interest from the larger corporate occupiers.
The most common reasons given for people seek coworking spaces are interaction with people (84%), random discoveries and opportunities (82%), and knowledge sharing (77%) (according to researchers at the University of Michigan). This environment has been proven in various studies to increase productivity and this is one reason why bigger business has recognised an opportunity to share in this benefit.
The conventional serviced office offer of a small private office with minimal thought given to collaborative space is therefore receding as more creative and collaborative workspace comes to market. The 2018 Global Coworking Survey demonstrated that there is still space for the private office but the trend is towards sharing this across multiple member companies within a coworking environment rather than designating it to one company.
The importance of employee wellbeing is also acknowledged as an increasing driving factor in the recruitment and retention of staff. The new wave of workspace is placing this at the forefront of its design, with the inclusion of benefits such as shower and cycle facilities, healthy drinks and snacks, good natural light and fresh air and the inclusion of green space or products within the shared spaces.
New space into the Southampton market for 2018/2019 includes Southampton City Council’s new Networks space with a creative, digital and knowledge-based focus, SO Fourteen has launched in the Old Town with back-up support for entrepreneurs and SMEs and Gentian’s new coworking space operated by co-tenant Coffee Lab has opened in the historic Bargate Quarter.
The operation of coworking space is however still maturing and it is by no means guaranteed to make a profit from the outset. According to The 2018 Global Coworking Survey only 42% of coworking spaces (globally) are profitable. This is in part due to the relatively high level of new coworking operations that have opened only recently. Evidence shows that 80% of the larger more established operators are making a profit as they have established themselves and built their brand.
So are there too many coworking offices? It appears not yet according to independent research which suggests almost 60% believe that saturation is ‘just right’, while 22% think there are ‘too few coworking spaces’. And if the growth in the SME sector continues and with larger corporates also recognising its benefits evidence suggests there is more growth in this space to come.