In August, it emerged that flexible office giant Regus had acquired rival Basepoint Business Centres for around £100m. The deal was significant in and of itself – Regus was seeking to consolidate its dominant position in the market and at a stroke added about 1m sq ft to its portfolio – but it was also indicative of a wider trend.
The growth of the flexible office sector has been seemingly unstoppable in recent years, with research by The Instant Group published earlier in the summer showing that flexible space had grown by 18% globally in the previous 12 months.
The Regus deal followed Blackstone’s acquisition of The Office Group earlier in the year, as well as the ongoing and rapid expansion of WeWork and other co-working and flexible office providers in recent years. As a result, more M&A activity is expected as companies jostle for position. Upmarket operator London Executive Offices (LEO), for instance, is currently being marketed through Citibank and HSBC by owner Queensgate Investments with a price tag of £700m.
At the same time, rents commanded by traditional prime offices have been falling, particularly in central London. According to CBRE’s latest Prime Rent and Yield Monitor, published in July, central London prime office rents fell for the third consecutive quarter, dropping. The West End market saw rents drop 1.5% and in the City rents fell by 1.8%. Across the country prime rents in the office sector fell by 0.2% over the period.