A record lack of office space in the heart of one of the UK’s most thriving cities for small, innovative businesses is likely to lead to rising prime rents and present opportunities for flexible workspace operators to fill the gap, according to newly published research from sector experts GKRE.
The shortage of Grade A stock in Nottingham has been caused by the highest ever take up of offices in recent years, on the back of several significant regeneration and commercial projects. This has included HMRC taking 276,000 square feet for a new regional centre (which will bring more than 4,000 new jobs to the city), as well as the University of Law taking 28,814 square feet in central Nottingham.
As a result office supply in Nottingham is now at an all-time low of 897,000 square feet, and prime rents are expected to rise from £20 per square foot to £25 per square foot by the end of 2020.
Moreover, with current flexible workspace occupation in the city at 90%, the GKRE report finds that flexible workspace prices in Nottingham are also expected to rise over the next 12-24 months..
Most of the flexible workspace operators in Nottingham are independents, with the only national operators having a presence in the city being Regus, Citibase, Pure and BizSpace. The report found that whilst lack of stock may pose a problem for operators wanting to break into the city’s market, Nottingham’s already underway £2bn Southern Gateway Project regeneration scheme is likely to offer opportunities for ambitious operators in the months ahead.
In addition the report noted that many of the Nottingham’s flexible workspace occupiers are from the city’s thriving health and fintech sectors, which draw heavily from Nottingham’s two world-class universities and their talent pool of 60,000 students, providing the local economy with an ongoing supply of new talent.
GKRE also predicts that in order to get a foothold in the flexible space market in Nottingham (and other UK cities), commercial property owners will increasingly enter into joint venture management agreements with operators, allowing them to utilise the expertise of an operator whilst capitalising on the growth of flexible workspace.
Will Kinnear, Director at GKRE, said: “This report demonstrates that there are great opportunities for flexible workspace operators looking to enter the market in one of the largest metropolitan areas in the UK. With Grade A stock being low in the city centre, this also presents opportunities for property owners and landlords to enter the flexible workspace market themselves, by entering into joint venture management agreements or leasehold deals. Overall, the outlook is very positive for the Nottingham office and flexible workspace market and we expect to see growth in both sectors over the next few years.”