UK SERVICED OFFICE INDUSTRY TO REACH £62BN BY 2025
The arrival of coworking space and flexible offices in the UK has completely changed the face of the serviced office industry and is set to boost the sector even further in the future. According to a report from research analysts at Capital Economics, the serviced office industry is set to increase in value significantly from the current figure of £16bn to £62bn in the years leading to 2025.
However, the report concludes the sector could currently be undervalued by as much as 20% and needs a specific market-accepted valuation approach to fulfil these optimistic growth projections. A true valuation of the serviced office sector will also build on its emergence as a separate asset class that is increasingly attracting interest from both domestic and global institutional investors.
The UK serviced office market is a British success story – by far the largest and most mature market internationally and the sector’s pace of expansion is set to accelerate further, as will its attractiveness for institutional investors. This makes the need for an accepted valuation mechanism essential to offer institutions and private investors a framework to help them fully embrace the serviced office sector and maximise its investment potential.
- UK is the leading global serviced office sector, with the largest and most mature market, accounting for over a third (36%) of the worldwide serviced office footprint
- Three key drivers are fuelling this growth: increasing numbers of growth businesses, expansion of key sectors that use serviced offices the most and the trend towards more flexible working
- Sector’s growing appeal and strong returns have seen its increasing attraction to institutional investors and its emergence as a distinct property asset class
- The serviced office sector still lacks a dedicated market-accepted valuation methodology, which would further spur its growth
- Using a conventional office model puts a £16bn value on the UK serviced office sector but it is likely undervalued by close to 20%, if it were appraised using a dedicated valuation approach
- Modest projections for the key drivers and using a dedicated valuation approach places the UK serviced office market at £62bn by 2025, while more optimistic projections set it at £126bn
Now is the Time to Invest
The serviced office sector is booming due to the rapid growth of coworking in the UK. Coworking space is the new serviced office model that introduces flexibility, collaboration and networking opportunities to shared workplaces, tailor-made to suit the needs of the rapidly expanding freelance or ‘Gig Economy’.