EMEA: A Gap in Flex Supply Breeds a Market of Opportunity for Workspace Providers

Tuesday, March 5 , 2024

The Instant Group’s recently published EMEA State of the Flex Market report reveals that although workspace providers may be facing challenges, the region is well positioned for growth.

The fragmented yet evolving flexible workspace market in EMEA is in a unique phase. According to our latest research, flex demand has surged 35% since 2019, but supply growth continues to lag, indicating a clear opportunity for operators and landlords. Despite emerging market opportunities, strong economic headwinds and a lack of data visibility are causing challenges for workspace providers wanting to bring new supply to the region.  

While primary markets hold steady, there’s little investment into growth markets. Growing operators are clearly weighing their options yet are evidently hesitant to take the plunge with limited data to underpin their investment decisions. In our latest EMEA Flex Space Market Review, we highlight recent data and insights to help providers expand strategically by identifying which markets are best positioned for flex. Below is a sneak peek. Get the full report here: 2024 EMEA Flex Space Market Review

Fluctuating Pricing

Our research shows significant fluctuations in flex desk rates across the market. These fluctuations are more unpredictable than we would normally see in a stable market where, for example, high flex demand and low supply growth would typically result in a significant rise in prices. 

The main challenge operators face, according to our Future of Flex survey, is the rising cost of doing business. They're struggling with balancing rising costs and competitive pricing. In the crosshairs is their ability to attract customers and increase occupancy. Gaining clients is not easy in an increasingly competitive market facing tough economic headwinds, though this varies market to market as well as by brand category.  For example, premium operators have seen prices stay strong, and in some cases even increase.  

Growth on the Horizon

Supply growth has been more subdued over the last few years. Our report shows supply has only increased 4% in EMEA over the last five years. However, operators and landlords demonstrate positive sentiment. In particular, 46% of landlords plan to offer additional flex space across their portfolios to meet increased demand for more agile workspaces. Sixty-three percent of operators also plan to expand their footprint in EMEA as the market stabilizes.  

While flex penetration rates in key cities are still relatively low compared to other markets like the UK, there is significant headroom for additional flex supply, especially in cities such as Riyadh and Dubai. Still, with over 95% of operators in EMEA currently operating in a single country, we expect to see UK and North American operators expanding into the region, alongside consolidation. 

Amenities and People

Occupiers are demanding more from their workspaces. We're seeing a significant increase in the number of searches for locations that offer amenities. While it varies country to country, meeting rooms were overall the most searched for amenity. What stood out in our research was the number one differentiator for choosing one brand over the other: friendly staff. Hospitality and service are the hardest components to get right, but they are also what really set flexible workspaces apart from other leasing options. 

Spotlight: France

The hub-and-spoke model is triumphant in France, which businesses are increasingly using to inject more agility into their portfolios, particularly in Paris. The trend we’re tracking is companies downsizing their office space and moving to central Paris to have access to premium spaces. Albeit less cost effective, nicer spaces drive better employee experiences, specifically due to the connectivity of central Paris with transportation hubs to rural regions.   

As a result, the average requirement size for flex spaces in Paris has decreased slightly, while it has increased significantly in well-connected locations outside of Paris. Clients are taking larger spaces in areas like Lille and Nantes, where it’s easy to commute to and from Central Paris.  

Spotlight: Germany

Berlin has historically maintained a stronghold in Germany for the city with the highest flex demand. Its position was challenged by Munich in recent years, and most recently Hamburg, which is attracting operators to capitalize not just on the growing demand for flex, but also the presence of larger corporate occupiers. There has been a significant uptick in 25 workstation and above requirements in Hamburg. The challenge will be whether current supply can accommodate this type of larger-scale occupier demand.  

Spotlight: Spain

Spain is experiencing a supply-demand imbalance. Demand for flex has risen significantly in emerging markets such as Valencia, Malaga, and Marbella; however, supply growth has remained flat. Meanwhile, demand levels are still recovering in Madrid and Barcelona, yet new supply is concentrated in those cities. The challenge for growth operators in emerging markets is finding well located and quality assets that are prime for flex space.  

With the right data and insights, expanding workspace providers can be optimistic about European markets. Finding quality assets where demand for flex is growing will be critical, but equally so, enabling occupiers to search and book the workspaces that unlock smarter workspace environments.  

Read the full report here. To learn more about how The Instant Group is supporting workspace providers, contact our team today: mailto: [email protected]

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