Room for growth: the scale-up office block

Guest blog: Briony Phillips, Scale-up Enabler at Engine Shed, discusses the major challenges and solutions for scale-ups looking for office space in the region
7th December 2017

Affordability. Availability. Suitability. These are the three core office space-related issues that scale-up business founders raise regularly when I quiz them about the challenges of fast growth in the West of England. In my role as Scale-up Enabler for the region, scale-up founders are not the only ones who raise this frustration. Planners, agents, office managers and investors all articulate similar concerns.

Availability of office space in Bristol was at an all-time high in 1992 when we had 1.2M sqft available but, since then, we have seen office space preferentially converted to student and residential use through a legal instrument ‘Permitted Development’. We have also seen a real boom in the number of large corporate firms taking up offices in Bristol.

“Offices designed for 6-30 people in Bristol are struggling under the weight of demand”

 

Today there is, at most, 10,000 sqft available on a good day. With declining availability, it’s inevitable that we’ve seen land rent skyrocket with premises now demanding in excess of £28/sqft and in some cases over £30/sqft. But, even if we’re able to magically increase the amount of space available (assuming we’re able to convince investors and developers to build speculatively on the basis of demand, or reverse Permitted Development), there are other issues to contend with.

Fast growth scale-up businesses require a degree of flexibility; landlords set a covenant (often with demanding expectations of revenue/company stature) and require tenants to sign a 5-10 year lease which, when you’re growing at 20% year on year (or more), is rather restrictive.

Offices designed for 6-30 people in Bristol are struggling under the weight of demand and many managers of such spaces report significant waiting lists and raise concerns about the stagnating effect that office availability is having on the growth and success of businesses with ambition to grow – and on our economy more widely.

Solutions for scale-ups

In response to these challenges scale-up founders and corporate businesses locally have been getting creative. In the region there have been a number of recent cases of scale-up businesses seeing an opportunity to sub-let a number of desks or specific area of space from corporate neighbours. Whilst they have relatively easily identified a suitable opportunity, landlords repeatedly step in to refute such a move on the grounds of specifics buried deep in the corporate tenant’s lease agreement.

“We do have a tremendous community of individuals working hard to help resolve this challenge”

 

Bristol and Bath were named in the TechNation report as the most productive tech cluster, and more recently identified by startups.co.uk as the best place to start a business. Sadly though, in my opinion, we risk losing these titles and some of our most exciting businesses to other regions, if we are unable to unlock office and workshop space that enables them to grow in line with their ambitions, and with market opportunity.

‘But is this really an issue? I see lease signs and plots under development all over the city’ I hear you cry. Let us take a look at the data. At the recent ‘Scale-up Briefing: Room for Growth’ event that I hosted at Engine Shed, Gavin Eddy – Founder and CEO of Forward Space, a company that offers workspace, resources and community for creative small businesses – told the audience that he has a waiting list of 17 businesses for the Boxworks shipping containers located behind Engine Shed.

Community of experts: the best of Bristol’s scale-up and
working space specialists discuss solutions to the problem
at Engine Shed’s recent scale-up briefing

 

Not only that, he had recently let two containers within just 12 hours that had become available from January 2018. This isn’t an isolated story, most of the multi-occupancy or hybrid office managers that I speak to tell me similar tales. I’d like to build a more detailed picture of the demand for space and invite scale-up and start-up businesses to share their needs in this super quick survey.

And on the other side of the coin, some of the fastest growing businesses with most potential for positive economic (and wider) benefit are spending days and days over months and months trying to secure suitable office space. There’s no doubt that their time could be spent more productively elsewhere.

Community collaboration

We do have a tremendous community of individuals working hard to help resolve this challenge and helping companies to prepare for and make a move – our colleagues at Invest Bristol and Bath and the commercial property agents not least amongst them.

“Some progressive people are exploring the possibility of a shared ownership model for scale-up businesses”

 

But what can we, as a community of collaborative, ambitious public and private sector and independent people do about this? There are a few ideas that are in discussion in pockets of the region, many of which depend on our collective ability to unlock investment:

  • A number of multi-occupancy space management companies are actively looking to open up ‘grow-on’ space in Bristol and Bath – but are struggling to find available and suitable premises.
  • I understand that some landlords have observed this growing trend and that there may be some progressive thinkers who are willing to accommodate our scale-up community. I’d love to hear from them and see landlords become more open to the possibilities of sub-letting space to build some flexibility into the market.
  • Some progressive people are exploring the possibility of a shared ownership model for scale-up businesses and considering how we can ensure that ‘placemaking’ is at the core of our office space activities, not just square footage.
  • Existing office space providers are looking to expand their available space and to explore how we can better pool demand – not least the Engine Shed and some others outside Bristol.
  • Two local authorities are interested in exploring how they could support the development of ‘grow-on space’ in response to the demands of the industrial strategy by taking a head lease.
  • Estate agents CBRE just released their Flexible Revolution Report in which they interviewed 25 members of their occupier community and explored the traditional lease model, platform model and profit/revenue share model.

Project workspace

There are also a few projects that are already underway which will start to alleviate the problem in 2018. Whilst these solutions are a great starting point, it would be dangerous to assume that these will provide enough capacity for the growth we (and many founders) anticipate:

  • We will see two new offerings to the market from Gavin Eddy’s business, Forward Space in Bristol alone in 2018. These will be hybrid office spaces for co-workers and startups – no larger than 6-8 people per business.
  • Origin Workspace is due to launch in 2018 in Berkley Square – a 40,000 sqft space which is looking for expressions of interest from potential tenants.
  • Newark Works (40,000 sqft) will open in Bath, mostly under the management of property developers TCN in 2018.
  • The former generator building in Bristol is being converted into a creative and tech hub.
  • Spaces, the latest offering from Regus will open in Bath in 2018.
  • Engine Shed 2 is one step closer to being built after the planning committee passed their application earlier in November (pictured right), this is still 2 years away but will include specific ‘grow-on’ space.
  • This recently announced Free Space+ competition invites startup businesses to win retail space in Bath and Bristol – a short-term fix but a creative opportunity and hopefully indicative of some future re-purposing of unused retail space.

At Engine Shed, we have started to map the available office space (and other assets for scale-up businesses in the region) on our Scale-up Ecosystem Map. I’d like to invite any support providers who have an offer specifically for scale-ups to check whether they are listed and to add themselves using the form in the ‘About this map’ section if they’re not already there. If you need support, you can contact your local unitary authority or Invest Bristol and Bath who are available to advise and assist businesses looking to move within or relocate to the area in the first instance.

If this is a topic that interests you and you have the means/opportunity to do something about it, you can get in touch by emailing Briony or by dropping her a message on Twitter here: @BrionyPhi1.