According to Knight Frank’s annual Birmingham Report, there has been a structural shift towards the development of what it calls Space-as-a-Service – the provision of flexible customer-centric office provision rather than the simple provision of a fixed, rigid physical office lease.

Jamie Phillips, head of Knight Frank’s office agency in Birmingham, said: “Typical UK lease lengths, although shortening, still require occupiers to commit to a term that represents at least two business-planning cycles. This presents great risk to an occupier. Space-as-a-Service gives the tenant greater control over the duration of their occupation.

“Embracing Space-as-a-Service models is key to the vibrancy and competitiveness of not just the Birmingham market, but the landlords themselves, and these new disruptive models should be embraced.”

Over the past 18 months, Birmingham has witnessed an explosion in flexible office provision. More than 20% of Birmingham transactions –- approximately 313,000 sq ft – have been divided between various flexible models such as co-working, traditional managed centres, and operators who are providing a fixed term, fully serviced office to identified occupiers.

Jamie Phillips added: “Space-as-a-Service models have released the genie of customer service from the property bottle. In order to capture all market demand ‘traditional’ landlords are waking up to the need to provide greater flexibility, cultivate customer relationships, become ever more understanding of the customer’s business and be more responsive to their needs. 

“More landlords now know that failure to address this need will reduce the size of their addressable market and hence limit performance.”

The Knight Frank report identified that Space-as-a-Service models differed from traditional supply-side leasing approaches by offering flexibility of lease length to give occupiers greater control over the duration of their occupation, and by aligning the space to the occupier’s precise business needs, down to a workstation level. This negated the need to hold expensive, under-utilised space in support of future potential expansion, and enabled rapid scale-up or scale-down.

In addition, they provided office designs offering greater community and collaboration with neighbouring businesses, and a customer service approach that provided experiential spaces to stimulate workplace satisfaction, happiness and, ultimately, productivity.

The report said that the gap between conventional real estate product and Space-as-a-Service would converge as landlords took on the challenge. 

“Convergence will see the co-working and conventional product co-exist but the distinction between the two will become increasingly meaningless,” Jamie Phillips said.

“Already we are seeing this co-existence within physical product, with occupiers opting for buildings that provide around 10 to 20 per cent of total space on a flexible basis alongside more  conventional ‘core’ occupancy. From a landlord’s perspective this flexible provision becomes the lungs of the building giving firms the ability to expand or contract and bringing real vibrancy to the space.”

Jamie Phillips cites the Lewis Building in Birmingham city centre, previously known as Temple Court, as an example. A £20 million refurbishment of the former department store building was completed last Autumn and workspace provider Regus Spaces has agreed a deal on 32,000 sq ft of office space where businesses will be able to work where, when and how they want.

For further information, please contact:

Ken Harrison, HPR Marketing, kharrison@hprmarketing.co.uk.  Call 07801 649045

Ella Mullings, Commercial PR Officer at Knight Frank, ella.mullings@knightfrank.com, +44 2038 970 044