The coronavirus pandemic and the accompanying lockdowns have encouraged more community-focused thinking and a greater sense of civic belonging, which feeds into the co-working agenda and what it can offer in terms of community and culture.
With small and medium-sized enterprises leading much of the UK’s future innovation and enterprise, the availability of affordable, flexible office space is vital for their innovation and growth by supporting entrepreneurs in the early stages of their businesses and contributing towards the wider economy.
Unless they are the lucky recipient of substantial early investment, the options available to a newly formed business tend to come down to a choice between finding an “affordable” space – typically space operated by a local authority or community organisation at a subsidised rent – or taking several desks from a flexible or serviced office operator.
Although coming from different price points, what affordable and flexible workspaces have in common is an emphasis on tenants co-locating with their peers. This can bring many potential benefits, including an informal support network to encourage wellbeing, increase productivity and offer opportunities for collaboration and community, which may not always be present in a traditional office workspace.
Priced out
The popularity of flexible office space has increased dramatically recently, with the past five years seeing more than 2m sq ft of this type of space being taken across the “Big Six” regional cities (Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester). However, alongside flexible space provision, these cities are now crying out for more affordable workspace to cater to the percentage of cost-conscious start-ups and individuals within these locations that may otherwise be priced out.
The chart shows the average pricing difference between flexible and affordable workspace in the Big Six, which ranges from 30% to 50%. Interestingly, Bristol has one of the highest flexible desk prices outside London, but with prices for affordable space being more than 50% cheaper, the city has the largest rental gap between its flexible and affordable workspace of the cities examined. This could go some way to explaining its positioning as one of the key creative hubs outside London.
Flexible space does, of course, tend to offer a myriad of other services to support start-ups, from formal business and legal advice to “Zoom rooms” and networking events with more established companies, which may not be on offer in affordable spaces. Many potential tenants will regard these services as good value for money, which justify them paying their higher rental costs. In some locations there may also be cheaper “budget” flexible options, but the guide monthly desk price reflects the whole market, including premium and mid-range options which include a higher quality of fit-out and wider range of amenity.
Innovation and vibrancy
There is a growing proportion of start-ups for whom securing the lowest possible “no frills” rent is the top priority, and therefore there is a need to maintain a healthy pipeline of affordable space across the UK’s cities to help these businesses thrive.
While applicable to London, where dramatic rent rises have squeezed out some independent businesses, many of the measures in the new London Plan are relevant to other UK cities struggling with rising rents while trying to maintain the diversity of their economic ecosystems. In fact, there is no shortage of local authorities and developers that would like to have a significant community of innovative and exciting start-ups to bring vibrancy to their area or development – the challenge is how to do it.
In order for this to be achieved, local authorities need to step up and act as catalysts for change. They are uniquely placed to act where the market cannot or will not provide the right types of workspace at the desired price points. There are obvious benefits to local authorities taking this approach – it is a low-risk way to encourage job creation that can tie into wider regeneration strategies while bringing in revenue and engaging with small businesses.
As local authorities take on a more active role in development through joint ventures and development vehicles, they are also looking at other ways to get the best value from their assets, including bringing underused properties back into full use to deliver affordable space.
A good example of this is Manchester City Council’s project to transform two dilapidated buildings and three railway arches into spaces for the tech and creative industries.
The Culture in the City scheme, which has been awarded £19.8m and is one of the first projects to be awarded money through the government’s Levelling Up Fund, is focused around two locations in the city centre’s creative district. It will see the Upper and Lower Campfield Market buildings, which are both listed but in need of renovation and refurbishment, being brought back to life as an affordable tech hub with more than 1,000 workspaces. The council will work with its development partner, Allied London, to deliver the repairs and refurbishment works and, on completion, to manage the Exchange tech hub workspace as part of the Enterprise City district.
Down the road in Birmingham, art gallery and studio complex Grand Union is beginning the transformation of Junction Works. The Grade II listed building in Digbeth has been awarded £500,000 by Greater Birmingham and Solihull Local Enterprise Partnership, alongside £25,000 of sponsorship from Stoford Development and £150,000 of private funding, towards phase 1 works to develop new workspaces for creative sector businesses.
Cultural support
The government is also starting to encourage local authorities and property owners to make spaces available for cultural activities and associated businesses, assisted by Arts Council England, which supports artists’ spaces through funding and brokering partnerships. For example, Bristol’s Spike Island, backed by the Arts Council and Bristol City Council, provides subsidised workspace and offers opportunities to make national and international connections, as well as providing peer support and collaboration.
Leeds has three innovative workspaces that have won the backing of senior councillors as part of a bid to give the city’s creative individuals and start-ups a much-needed boost. The city council has supported these projects to benefit from the newly created Creative and Digital Workspace Fund, set up to give start-ups more opportunities to flourish.
However, affordable workspace should be more than just a building. Ideally, it promotes a vision to develop an ecosystem of experience-led mentorship, collaboration and connection – places where people meet, practice, collaborate and produce. Spaces such as Exchange in Manchester, which is pioneering the future of tech and digital working, offer a good template for others. Created in collaboration with Tech Nation, Exchange offers the most ambitious early stage tech companies access to the tools and learning to succeed. It provides a six- to 12-month scheme for tech businesses in the North West, delivering a syllabus and direction for development within the market.
In Glasgow, RookieOven is home to a range of event streams and hackathons, and hosts monthly social and business events. All of this contributes to the retention of graduates in regional cities, supporting the pipeline of talent and emerging creative businesses. The aim is to provide a boost for entrepreneurially minded people living in key regional cities and encourage the next generation of talent, along with supporting stronger business communities.
Ultimately, no single organisation can achieve the creation of affordable workspaces on its own – it requires joined-up thinking and a willingness to work together. Councils need to collaborate with local businesses, business associations and workspace providers to identify the organisations that will be key occupiers for the affordable workspaces, and the best ways to deliver them.
The bottom line is that by delivering affordable spaces that nurture start-up relationships, we can create happy, collaborative places of work and help the UK economy grow.
Clare Bailey is a director in the Savills commercial research team
