Flexible workspace providers as tenants: an analysis of the rental prices in the London market

Abstract

Purpose: The covenant strength of flexible workspace (FW) providers as tenants is debatable. There is the argument that providers are risky mainly due to the very nature of their business which consists of volatile revenue streams obtained from subletting the space in membership format, paying little attention to covenants. On the other hand, there is also the argument that the presence of a provider can add vibrancy and diversity to a building whilst also offering an additional amenity to existing tenants through overflow space, making FW providers desirable. This paper aims to explore this ambiguity by comparing rents paid by FW providers and other tenants within the same building in London over the period 2011 to 2021. Design/methodology/approach: Using a dataset of 1,042 leases in London over the period of 2011–2021 which was extracted from CoStar, the rent conditions of FW providers and their peers within the same building were analysed employing a hedonic pricing model. Findings: The results of the analysis suggest that FW providers have a negative and statistically significant effect on the effective rent in comparison to other tenants within the same building over the analysed period. Practical implications: This analysis has the potential to identify how FW providers are perceived in the market and offers both academics and practitioners valuable insights. Originality/value: The relationship between landlords and FW providers as tenants does not have a major coverage in the literature.