By Nick Thorne, European Head of Operations
Although coworking now exists in a wide range of cities across the world, it has tended to flourish in the presence of certain local conditions, such as high rents and the hothousing of startups in tech and creative sectors.
Cities like London and New York have found themselves in the vanguard of the new approach to occupying office space. A report earlier this year from CBRE states that London boasts around 1.1 million sq m of what it terms flexible office space, equivalent to over 5% of the city’s total office stock, making it the biggest overall market in Europe.
Cushman & Wakefield’s Coworking Hotspot Index also highlights the dominance of London’s coworking offering, claiming that combined with New York, the two cities account for 22% of coworking space worldwide.
But things are changing, as coworking finds new markets in new cities and for new sectors. Coworking is no longer just an option for tech startups in commercial property hotspots, and this is reflected in the changing scenes in a number of other major European cities.
Paris finds itself in second place in both lists of European coworking centres. Although second, it is somewhat behind London in terms of the amount of space it offers, just over a third of the UK capital’s stock of flexible offices, amounting to 440,000 sq m of coworking space.
However, there are reasons to suppose that this is about to change. Paris is one of the most expensive cities in the world in which to rent a desk and live more generally. It is also a fertile space for startups. Startup Genome’s 2019 Global Startup Ecosystem Report ranks Paris alongside Silicon Valley, New York, London, Los Angeles and Beijing as one of the top 10 startup locations in the world.
These are the perfect conditions for coworking and sure enough there are signs of latent demand in the market that will soon manifest as an increase in supply. Instant Offices’s recent report shows the demand for flexible office space in Paris is almost double the global average, and the wider French flexible workspace market has seen double-digit growth of 20% in the last 12 months.
There is no doubt that Berlin dominates the German market when it comes to startups and coworking. A 2017 report from EY noted that 70% of the venture capital raised by Germany’s top 100 startups went to Berlin, while Munich ranked third with 7.9% of capital.
However, the federal nature of Germany means that cities like Munich have their own role to play as state capitals and anticipate seeing this shift in the future. The Bavarian capital was rated as Europe’s 10th biggest startup hub in 2018, and in the same year was proclaimed the world’s most liveable city by Monocle.
Data from Stack Overflow shows there are 98,000 professional developers in Munich compared to 100,000 in Berlin, with a population over twice as large.
As is the case with Paris, there appears to be a great deal of untapped demand in Munich for flexible office space. Munich already offers nearly 250,000 sq m of flexible office space (CBRE) but, according to AllOfficeCenters’ Germany Coworking & Office Center Market Report, despite a 65% increase in the total amount of flexible workspace stock, all recently opened centres are already at full capacity.
Watch this space.
Coworkies Magazine suggests Madrid is already home to over 150 coworking spaces. This means it is roughly in line with Berlin which has a similar population but enjoys a greater reputation for tech and creative startups and attracts more investment. As with many major cities, the coworking scene consists of a mix of larger operators such as WeWork and Spaces alongside numerous smaller and independent workspace providers.
The similarities with the German market don’t end there, as Madrid, like Munich is playing catch up with another major city in its own country in terms of attracting and establishing a start-up ecosystem. Madrid is also the city with the seventh-highest number of computer developers in Europe at 111,800, as said by a survey by LinkedIn and Stack Overflow.
In 2018, startups in Madrid received €342 million in investment, as reported by the Digital Startup Ecosystem Overview 2019. Although this marked a major increase from the €60 million it received in 2013 it lags behind other European capitals; €4.7 billion in London, €2.3 billion in Paris and €2.17 billion in Berlin.
This might be a question of life cycle because Madrid already has more tech startups than Barcelona (1,235 vs 1,197) but attracts less than half of the investment. This is a city that is also ripe for the development of an even more extensive network of coworking centres.
A report earlier this year from Startups.co.uk concluded that the best city in Europe in which to launch a startup in the post Brexit era (assuming there is one) is Budapest. Although this had a lot to do with the Hungarian capital’s generous corporate tax rates, but it is also among the Top 100 GDP performing cities in the world, measured by PricewaterhouseCoopers.
Startups.co.uk notes that “the city is already home to a growing number of business accelerators and a wealth of funding sources, with growing interest from international angel and VC investors. The result is a vibrant startup hub with huge appeal for tech entrepreneurs.”
Budapest does provide a vibrant flexible offices hub, although the Cushman & Wakefield Coworking Hotspot Index suggests that this is primarily about the serviced office as opposed to coworking market. In 2018, coworking operators commissioned more than 200,000 sq m of office space in Central and Eastern Europe’s four largest capitals.
Warsaw was the most active market with 92,400 sq m take up by flexible office operators. Moscow came second with 64,300 sq m followed by Prague and Budapest: 27,100 sq m and 17,500 sq m respectively. However, IWG Group is the largest flexible office provider in the region and while WeWork took up extra space in Moscow, Warsaw and Prague in 2018, only one coworking provider took on extra space in Budapest. Could it be a sleeping giant?
Find out about Area's experience in Europe at areaeurope.com