Unicorns and start-ups gallop towards managed offices

COMMENT Having Flo Health take space with Kitt last month was a real signal of intent as to what tech businesses want from their workspace and where the office leasing market is headed. The firm joins us at International House, near Tower Bridge, showing the value of the managed office concept, while also demonstrating a real shift in how the office market is moving from the traditional leasing model. This $1bn tech unicorn can now focus its in-house resources on what it does best — building and scaling the world’s most popular female health app. The average lease length in the UK in the first quarter of 2019 was 52 months, or more than four years. But the figure for the same period this year was 3.7 years. Landlords have been sensing this for a few years now. A new dynamic between property owners and building occupiers has emerged: it’s no longer a case of exchanging a set of keys – occupiers want and expect a much greater level of service to be provided than was the case just a few years ago. Changed mindset What works for tech firms – staying nimble, adjusting headcount and operational needs – could equally be the best option for many different types of occupiers, particularly those with teams of between 20 and 250 people. Their mindset has changed forever. That frustration of finding the perfect workspace was what inspired Steve Coulson and I to start Kitt just over five years ago: we knew there had be a better, more streamlined way to lease office space. If occupiers can work with a managed office provider that takes care of everything from sourcing and leasing the ideal space to designing a workplace that truly reflects their brand, then that’s an easy button to press. This is especially true if the offer can be delivered at speed so firms can continue to operate without missing a beat without the hassle of hiring facilities teams or dealing with the complexity of multiple service providers. By outsourcing the real estate function in this way, particularly the experiential side, this is helping occupiers give their staff a reason to come into the office. And as ONS statistics show, more than a quarter of workers report working from home and travelling into the office, with London showing the highest levels of hybrid working (four in 10 people surveyed), so there’s clearly work to be done in terms of the return. Not to mention a global movement towards in-office working by firms such as Amazon, which recently abandoned its hybrid working policy in favour of a five-days-a-week mandate. For property owners and agents, the new and fast growing sub asset of managed offices offers a more lucrative alternative to other office leasing models and can achieve up to 40% higher rents and significantly reduced void periods. Overall office market data for the first half of 2024 shows the so-called “flight to quality” is what’s driving office space take-up. More than 80% of the 1.3m sq ft (up by 45% compared with the same period in 2023) was grade-A space, with some three-quarters of those deals being less than 20,000 sq ft. Data-backed approach Even if property owners are fortunate enough to have a building that is in a primary location, they still need to compete on product, whether that’s providing an authentic, curated approach or harnessing a tech-driven infrastructure. Indeed, a data-backed approach to occupier satisfaction is something that’s been ignored by many property owners using traditional leasing arrangements for many years. Those operating in tech often plan for rapid growth, as evidenced by Flo Health chief executive and co-founder Dmitry Gurski, who intends to double the number of employees the company has in the UK. Gurski added that the firm’s workspace is built to support that growth, providing “an environment where its team can thrive and do their best work”. But nearly every business’s needs change over the period of a lease and responding to “day two” plans is vital. Evolving from a traditional long lease to a customisable leasing model is key to helping occupiers along that journey. Lucy Minton is co-founder of Kitt