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Cllr Jonathan Glanz represents West End Ward on Westminster City Council and is the Council’s Lead Member for Broadband and Connectivity

Recently, we have heard a lot about the pressures on retailers. Rents, rates, and the Internet are changing the composition and feel of our High Streets. However, there is also a huge change taking place in the provision of office space, which can have equally far-ranging effects on mixed use areas such as London’s West End.

WeWorks are now the largest tenant in London, but they are one of only some 600 companies providing flexible office accommodation for occupiers, from start-ups to major professional firms and institutions.

Long gone are the days when committing to an office involved a 25-year lease with up to five-yearly reviews.  This created an obligation to pay not only rent, but service charge contributions to cover repair, redecoration and maintenance of the building, insurance, porterage and other services – and an obligation to give the property back at the end of the term in the same condition. Historically, that suited the position of the landlord, particularly institutions, who could pay the pensions and annuities that they committed to, as well as the traditional great estates and landowners of the West End. All they had to do was to make sure that they had properly assessed the Covenant, i.e. the ability of the incoming tenant to pay those obligations, and sit back.

Whilst not an entirely new model, with Regus providing flexible office space for a decade, WeWorks and its imitators have changed all of that permanently and irrevocably. Now, instead of the long-term commitment, offices are available on an instant and short-term basis. Whilst providers of such facilities are not exactly renting by the hour, they are a lot trendier and more desirable than their predecessor short-term offers. It is not unusual to have commitments of as short as a month, which include all the ancillary costs such as rates, utilities, concierge services, and so on which were charged as extras to tenants on the previous basis.

WeWorks and others may have stolen the headlines, but many of the more established landlords are now fighting back. Landlords as diverse as the Crown Estate, Land Securities, and British Land are amongst those who have now entered the market but with one particular advantage. Unlike new flexible space operators that rent their property, whether occupied by end users or not, these established landlords own the buildings, and are effectively now able to take a slice of the greater income streams that such arrangements offer.

Whilst some of the new flexible office providers have yet to make a profit and may never do so, those old-fashioned landlords with better properties in better positions, deeper pockets, and more experience prove that location trumps everything.

Soho and its environs have for long been a core area for the creative industries. What is interesting is that many of the occupiers who are now using these new facilities are not from the creative industries, but from the professions, more traditional businesses, and the new disciplines of FinTech, PropTech, and others. My view is that historically, the members’ clubs that had sprung up before the advent of the flexi-space phenomenon, such as Soho House and Home House, had effectively provided the informal arrangements where meetings and discussions over coffee or a drink, and basic office facilities could take place. The creative crowd appeared to have stayed loyal to that kind of offer as opposed to moving into the new, probably better facilitated, rivals.

However, one of the perhaps unforeseen effects, and my real concern for our mixed-use area, is the fact that these new arrangements are designed to internalise spend. The provision of free coffee, fruit, and beer means that the traditional interaction between office users and the local service providers may be lost. People no longer buy coffee and a snack on their way into work, do not go out at lunchtime, and often stay in the premises late into the evening. Also, they are less likely to pop out to local suppliers for stationary or other supplies, much of which are ordered and supplied from online suppliers rather than locally-based businesses.

It is these small businesses which have provided the glue which has kept the community together, both residential and commercial. The provision of these inward-looking new facilities is putting such businesses under further significant stress at a time of increased rental, rates and other costs. It is likely that this will contribute to the loss of these independent retailers who ironically had been part of the very attraction that caused the office service providers to come to our area.

We have seen similar problems where large numbers of properties that have moved from long-term occupied rental flats to Airbnb and other short-term letting platforms. Again, this has destroyed communities, not just in terms of how and where people spend their money, but also the loss of the eyes and ears that made communities safer. An Airbnb tenant really does not care if the rubbish that they dump outside the flat on their way to the airport remains uncollected or strewn over a street in which they have no interest. Likewise, if they see drug dealing or other anti-social behaviour on their doorstep, they will not interact with the police or others to share intelligence vital in addressing such problems. Consequently, such action and behaviour goes unchecked, and further deteriorates the quality of life for the genuine residents left behind to pick up the pieces.

One thing is for certain: even if WeWorks and their ilk were to all go bust tomorrow, the market will not return to long-term leases requiring occupiers to take responsibility as had once been the case. The market has been shaken up by short-term flexibility, and will never be the same again. My concern is whilst liberating the position for occupiers, it has done so at a very real cost to the communities in which the facilities are based, to the extent that some office providers are now parasitic on the community rather than participating in it. Providers of such facilities must be encouraged to ensure that their doors are open, and that the spending power created is shared with others if they are to avoid destroying the very benefits and attraction of the mixed-use areas into which they have come.

2 comments for: Jonathan Glanz: Short-term office rentals threaten community cohesion

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