London Offices – The Rise of Managed Solutions

Welcome to JLL’s London Flex Market Trends report. This series will identify the evolving trends in the flex office market with a spotlight on specific flex products and innovative solutions supporting our diverse set of clients. In this first issue, we focus on the phenomenal growth of managed spaces, a key pillar within the flexible office landscape. Drawing from JLL’s data and insights, we delve into what is managed space, the various sectors buying the solution, and what is driving this surge.

Managed spaces are self-contained areas that include rent, business rates, service charges, IT, cleaning, utilities, furniture, and fit-out. These spaces are customizable in design and branding and come with flexible term lengths. Managed spaces can be tailored based on the partner involved:

• Short form lease directly with the landlord including a managed service agreement.

• Direct lease with the landlord with a separate managed service agreement.

• The managed provider takes the head lease, with a managed service agreement between the tenant and partner.

Occupiers and landlords alike explore managed space options to unlock greater flexibility and efficiency. Occupiers aim to adapt swiftly to changing business needs and create engaging work environments, while landlords look to attract a diverse tenant base and maximize asset utilization. Managed spaces have become a strategic solution for navigating the complexities of the modern real estate market.

Managed spaces are ideal for businesses that have outgrown traditional serviced offices but still want to maintain flexibility. JLL’s flex team reported that 75% of clients who took managed spaces in the last 18 months graduated from serviced offices. Conventional clients are also increasingly exploring this solution due to changes in working patterns and strain on capital and resources. The need to remain operationally agile through flexible lease terms and outsourcing is crucial, making managed spaces an integral part of long-term strategies.

Corporate occupiers leverage flex space to support changing business requirements. Managed space is a popular option that enables them to deliver bespoke workspaces and enhance the employee experience without the constraints of long-term leases and capital expenditure. Managed space is now a key strategic tool for clients aiming to remain agile in a dynamic business environment.

• Capex Light Solutions: Managed spaces offer a cost-effective solution by amortizing capital expenditures over the term duration.

• Location Control: Businesses retain control over their location, demise, and identity.

• Agility: Flexibility in lease terms allows companies to remain operationally agile.

• Enhanced client attraction: For landlord, managed spaces can lead to greater client attraction as occupiers look to achieve maximum value across their portfolios.

The London market has seen an explosion of managed operators, with lines between serviced office operators, landlord flexible space propositions, and managed spaces becoming blurred. JLL has established a dedicated Flex Leasing team to assist both managed providers and conventional landlords. This team helps expand market reach, attracting a varied set of tenants and supporting occupiers seeking early exits. The team brings together landlord flex advisors and commercial office professionals, providing comprehensive expertise and services to meet the diverse needs of the evolving real estate market.

For the first time in 2023, managed deals accounted for more uptake in flex space than serviced office deals for the JLL London flex team. With 60% of completed transactions falling under managed solutions (by size), this trend continued in H1 2024, where managed deals accounted for 63% of space taken. We expect this trend to persist as occupiers seek maximum value and evolve their strategies, incorporating core and multi-flex solutions.

Managed spaces offer numerous advantages over traditional office setups, making them a compelling choice for both occupiers and landlords:

• Short Form Lease: Managed spaces can be secured with short form leases, providing flexibility and reducing committed capital.

• Custom Autonomous Spaces: Managed spaces can be tailored to the specific needs and branding of the occupier.

• Enhanced Value: For landlords, the inclusion of managed spaces can enhance property value by attracting a diverse range of tenants.

• Operational Agility: Managed spaces allow occupiers to remain operationally agile by adapting quickly to changing business needs.

JLL's expertise in managed spaces and flexible office solutions is highlighted by their dedicated Flex Leasing team, which has helped countless clients navigate the dynamic real estate market. The team comprises specialists who bring a wealth of knowledge and experience, ensuring that both occupiers and landlords receive tailored advice and support.