When co-working and flexible office provider Spaces agreed a ten-year deal to take over management of the entire ground floor of Birmingham’s Mailbox complex late last year, it should have sent many eyebrows rapidly vertical followed by a round of curious nods.
While the loss of yet more retail units in the city will be mourned in some quarters, the least surprising element of the deal was that a huge 50,000 sq ft was being taken over by a flexible workspace company.
For it marked just another step in what appears to be a snowballing – and unstoppable – trend of office occupation in Birmingham as more vacant space is being snapped up by firms offering super flexible tenancies, hotdesking and shared co-working facilities, membership schemes and pay-as-you-go usage.
In 2019, US firm WeWork announced a trio of new locations in Birmingham city centre – although only one is currently operational in Colmore Row – while IWG occupies multiple sites through its Spaces and Regus brands.
This crop of corporate players sits alongside a plethora of smaller brands and independents such as Alpha Works and Orega in the business district and Melting Pot and Impact Hub in Digbeth among many others.
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The setup is very attractive to occupiers which do not want to be tied down to inflexible multi-year leases in the traditional vein of office occupancy, even less so as the business world emerges, battered and bruised, from the effects of the coronavirus pandemic.
Perhaps, then, it is not so surprising the Mailbox is making a move to office usage in a space where retailers have often struggled, even after the massive £50 million facelift was carried out in 2015.
Richard Croft is executive chairman of M7 Real Estate, which bought the Mailbox in 2019, and told BusinessLive the firm’s intention was always to pursue an alternative use of that ground floor following the buyout.
“What we know from the pandemic is that people want flexibility and we think the office has a great future post-pandemic,” he said.
“The reality is people like to work together. Spaces is a high-end offering with that flexibility and it’s exactly what the Mailbox needs.
“For those people who will want to use it, having all the amenities and restaurants on site means it is the right product in the right location and building.”
Mr Croft said the rise of flexible office space was a good thing for Birmingham which was now catching up with London on this front.
He added: “The traditional office lease is not a thing of the past but should we, as landlords, be offering a wider range of products to meet everybody’s needs? Yes, absolutely.
“The rise of co-working makes perfect sense, we had no reservations going down this route. The Mailbox should never have been retail – the food and beverage offering is among the best in Birmingham and we have some great restaurants out by the canal but it’s not a retail location.
“Mailbox is an office building with great food and beverage but it was never an out-and-out retail location.”
There was a time when business owners and entrepreneurs would sheepishly whisper out the side of their mouths that their company was based at a flexible office hub but now they are viewed – by many but not all – as legitimate locations to run companies.
They are also a good place for businesses to launch teams in new towns as they try to cement a place in a local market without taking on the burden of a long-term lease.
Andy Hartwell runs web development agency Substrakt in the Jewellery Quarter and used co-working facilities in London when the firm first decided to set up there.
He said any historical stigma attached to them had greatly diminished in recent years and business people now appreciated the role they played.
Mr Hartwell is also turning his hand to property redevelopment and is currently converting a former factory in the Jewellery Quarter into a new co-working hub called The Jointworks, due to open in the spring.
He added: “Even before covid, we were seeing a rise in people working for themselves and the freelance community growing and collaborating.
“They don’t want to sign up to rent an office so for those this is an attractive model where they can surround themselves with like-minded people and also have a place for client meetings.
“Clearly, people have become used to working from home and doing things such as video calls since the pandemic kicked in and I know many who are considering ending their leases and closing their offices to work from home.
“Now, more than ever, this model works where you can run a company but still have a space which you can offer to your employees for those who want to work in an office and have that space for meetings.”
Property agency Savills regularly publishes data on trends in the commercial sector and its research shows that take up in the flexible office sector in Birmingham city centre was 226,460 sq ft in 2018 and 230,978 in 2019.
Unsurprisingly, these numbers are expected to be much lower for 2020 but Ben Thacker, Savills’ director of office agency in Birmingham, says there is a really strong argument for choosing this model as the country emerges from the pandemic.
He said he was also currently handling multiple enquiries from companies requiring new flexible workspace facilities.
“People won’t know for the first six months of this year what they require,” he told BusinessLive.
“If they have a forthcoming lease event or an operational need but don’t want to commit because they don’t yet know what the next few years looks like, then flexible workspace has to be the solution.
“You can commit quickly, don’t have to sign up for a long time and not spend lots on moving which a lot of businesses are nervous about at the moment.”
He said lockdown had, in a bizarre way, been a boon for the office sector despite the fact millions of people were now fully set up to work from home.
“The reality is the longer lockdown has gone on, the more it has illustrated to people how working at home is not the long-term solution,” he added.
“It can work for part of the time but a lot of people have shifted their view from this very black and white stance of ‘I love working from home and never want to go back to the office’.
“I bet there are very few people out there now who would still share that viewpoint because it may be easier to work from home but it is not necessarily better.”
As a workplace, offices are not so different to anywhere else in the commercial sector and therefore must adapt with changing technology and the fickle whims of their occupiers.
Danny Parmar, Midlands chairman of industry body the British Council for Offices, attributes the rise in co-working space simply to this natural evolution.
“The office is not dead but it is evolving and has been for the 38 years I’ve been working in this sector and this situation we’re experiencing now is just the next step in that evolution,” he told BusinessLive.
“Just as online retail is being fast-tracked by the pandemic so the office is altering into a more collaborative work environment. It will change the shape of the workplace with employees being given greater flexibility around how they operate.
“If you’re a manager who travels around the country you may have the choice of using your head office or going to a co-working space when you’re on the move, rather than the employer having and paying for lots of little hubs dotted about.”
He said the rise of flexible office providers in Birmingham was inevitable and all covid-19 had done was sped it up.
“Birmingham is a destination for organisations, whether you’re small or big everybody is heading here, particularly government departments and organisations like HS2 and its supply chain,” he concluded.
“All of this creates the need for more office space so co-working organisations like WeWork and Regus know we are in a growing market and they need to be offering the solution.”