Flexible workspaces in the UK: a sustainable and lucrative investment opportunity

In the wake of dynamic changes in work patterns and the growing emphasis on sustainability, the prime office market and flexible workspaces in the UK have emerged as a highly promising investment opportunity. Businesses are adapting to new work models and employees are seeking versatile office set-ups. Investing in prime flexible workspaces that align with environmental, social and governance (ESG) principles offers a compelling combination of financial growth and positive environmental impact.

In 2022, the office sector held the largest share of real estate investment activity,[1] despite the increased shift to flexible and hybrid working practices since the pandemic. Prime office yields across the UK have been on the rise since the second half of 2021.[2] In addition, demand for prime office space has increased,[3] meaning that there is opportunity in office investment.

The shift towards flexible working

The traditional nine-to-five office set-up has evolved and flexible working is the new norm. Businesses now prioritise agile workspaces that accommodate remote working, hot-desking and collaboration. With the pandemic accelerating this trend, the demand for flexible workspaces in prime locations is on the rise. Last May, our City office relocated to accommodate these changes in our environment.

Sustainable workspaces

ESG considerations are increasingly influencing tenant decisions. Companies are actively seeking flexible workspaces that reflect their commitment to sustainability and align with their ESG goals. Environment-friendly features – such as energy-efficient lighting, waste reduction and sustainable materials – are not just desirable but essential for businesses aiming to lower their carbon footprint.

It is suggested that best-rated BREEAM buildings achieve higher rents than unrated buildings.[4] With 83% of Central London office properties having an EPC rating of C or lower, this means that there is opportunity to invest. Looking at the global picture, London is one of the top 20 cities in the world by number of green-certified office buildings.[5] However, there is room for improvement, as less than 20% of total office stock in London is green-certified, giving opportunity to invest in retrofitting and repurposing to access the higher rental yields available in London.

Energy-efficiency and green initiatives

Prime flexible workspaces can be designed and equipped with state-of-the-art green technologies. Incorporating renewable energy sources, such as solar panels and energy-efficient heating and cooling systems, significantly reduces the environmental impact of the workspace. Besides the positive effect on the planet, these green initiatives translate into lower operating costs and enhanced tenant satisfaction.

Government support for sustainability

The UK government is actively supporting sustainability initiatives. Investors in flexible workspaces can benefit from grants, tax incentives and funding programmes promoting eco-friendly buildings and sustainable practices. Engaging with these schemes not only drives sustainable development but also enhances the financial viability of such investments.

Conclusion

The rise of flexible work models, the growing emphasis on sustainability and high yields across the UK make this investment avenue particularly attractive. Investing in the office sector and flexible workspaces that embody ESG principles presents an immediate opportunity to combine sustainable growth with financial success.

[1] JLL, 6 February 2023, Total UK investment volumes reached 48.7bn for 2022

[2] Cushman & Wakefield, Marketbeat, United Kingdom, Office Q1 2023

[3] J.P. Morgan, 25 January 2023, Return to the office: The future of the workplace

[4] Savills, 6 October 2022, A green premium on the most sustainable offices will aid year long delays to London’s development pipeline

[5] Savills, May 2022, The rising demand for green certified office space