Why Industry-Specific Serviced Offices Are Still Uncommon

Over the past few years, serviced offices have become increasingly popular as businesses seek flexible, cost-effective, and well-equipped spaces. Small businesses, startups, and growing enterprises often turn to serviced offices for the shorter-term contracts, shared amenities, and the convenience of not having to manage many day-to-day office operations themselves and along with this, a desire for  benefits that a long-term lease doesn’t offer you. We regularly see our ‘serviced-seeking’ clients asking for:

• Flexibility of terms
• Cost consolidation (one monthly number)
• Room to grow & quickly

Despite the growing demand for serviced offices, there is a noticeable lack of spaces designed solely for specific industries. Whilst many providers offer spaces that can accommodate various businesses, the concept of creating offices tailored to the unique needs of particular sectors is still relatively rare. This raises the question: why aren’t more serviced offices specialised for individual industries, despite the clear advantages they could offer?

Operational Complexity

Tailoring serviced offices for specific industries requires a profound understanding of the distinct needs and challenges within that field. This often involves substantial investments in specialised infrastructure, equipment, and expertise to create spaces that meet those needs.

For example, a serviced office for tech companies may need cutting-edge networking capabilities, soundproof rooms for coding teams, and high-performance computing hardware, all of which are expensive and difficult to maintain. A finance-specific office, on the other hand, might need to adhere to strict financial regulations, extra-secure IT solutions to store client information or even provide secure client facing rooms specifically for confidential meetings.

Adapting an office to meet such requirements adds considerable complexity for providers, who must have the necessary knowledge and resources to maintain these spaces. Whilst providers like WeWork have historically advertised themselves as being tech-savvy office space providers, some would argue that this was more targeted marketing than actual product delivery.

Limited Demand from the Market

While some industries could benefit from office spaces designed to their specific needs, the overall demand for such spaces is relatively low. According to our 2024 London Office Market Report, flexible space demand is increasing year on year, but Office Freedom rarely hear from our clients that they need a space specifically for their industry.

In fact, many companies in certain industries don’t require specialised spaces and are still more inclined to choose general serviced offices. For instance, a law firm can operate efficiently in a versatile office designed for multiple types of businesses, while a tech startup might only need basic amenities like reliable internet, power outlets, and meeting rooms, rather than highly customised infrastructure.

Simply put, it looks like the market is happy with how it currently is. Check out the below from our 2024 report that outlines occupier types across London in 2024.

High Costs of Office Customisation

Designing and maintaining industry-specific serviced offices is a costly undertaking. Whether it’s installing specialised equipment, ensuring regulatory compliance, or meeting other sector-specific requirements, the expenses can quickly add up.

In contrast, general serviced offices are more affordable to create and maintain. These offices can accommodate a wide range of businesses without the need for expensive, industry-specific designs or infrastructure.

Providers of generic serviced offices can offer flexible, well-equipped spaces without incurring the significant upfront and ongoing costs of tailoring spaces for individual industries. Additionally, maintaining these investments often require constant monitoring and updating to match new and improved advancements, which many providers prefer to avoid.

Here's what Oliver Lee of Cater Jonas had to say on what drives providers:

"Demand for London office accommodation is being driven, in part, by the operators of serviced and co-working office space that are seeking accommodation for conversion, reflecting the robustness of occupier demand in that market sector."

Demand for Office Flexibility

The main appeal of serviced offices lies in their flexibility. Many businesses—especially small companies and startups—value the ability to easily adjust their office space to fit their changing needs. Open-plan layouts and shared amenities in generic serviced offices offer the flexibility that allows businesses from various sectors to potentially co-exist and adapt without significant changes to the space.

In contrast, industry-specific offices may limit that flexibility. Companies that operate in serviced offices may outgrow some features as their businesses evolve. For example, a tech startup may initially need a tech-specific office but might later prefer a more general office space as their operations grow or shift focus.

Furthermore, some startups might initially need certain amenities in their office a serviced provider can offer, but quickly grow into needing certain things in their office that a provider simply cannot realistically provide. Offering broader flexibility is often more attractive than catering to the niche needs of specific industries.

Lack of Specialised Knowledge Among Office Providers

Creating industry-specific serviced offices requires deep knowledge of the unique requirements of each sector. Many office providers, while skilled at managing general office spaces, might lack the expertise necessary to cater to the specific demands of industries like healthcare, finance, or law.

Each industry has its own set of regulations and needs. For example, healthcare offices must meet health and safety standards and provide secure, private spaces for patient consultations. Law offices require rooms designed for confidential client meetings. Without understanding these specific requirements, it’s difficult for serviced office providers to design and manage spaces that meet the expectations of different industries.

Furthermore, support services—such as IT support for tech firms or legal administrative services—are often required in industry-specific offices. Offering these services demands additional investment in staff training and resources, further complicating the process for providers to enter these niche markets.

Risk of Underutilisation

Another challenge of industry-specific serviced offices is the risk of underutilisation. When providers create offices tailored to a single sector, they limit the pool of potential tenants. A general-purpose serviced office, by contrast, can cater to a variety of industries, increasing the chances of maintaining high occupancy rates.

For example, an office built for medical professionals might remain vacant in an area with low demand for healthcare-specific spaces. Providers often prefer to serve a broad range of businesses to minimize the risk of empty spaces. This broader market appeal makes general-purpose serviced offices a safer and more profitable option.

In Conclusion

This is not to say there is no demand for industry-specific office space. Companies like Techspace have been growing rapidly and fulfilling the needs of many tech companies looking for the value of serviced offices, with the added nuance they need. What’s been interesting is there seem to be relatively few providers matching Techspace’s initiative with most other providers only marketing themselves to certain industries – rather than making it their fundamental USP. 

Providers like HERA Hub and Ethical Property are pioneering a new approach to be ‘philosophy-specific’ when providing office space for their clients, the first offering space focused on pioneering women in the workplace and the latter ethical practicing companies, but we aren’t seeing a huge growth in industry-specific serviced office providers.

Despite the potential market for a healthcare, finance, legal, or even recruitment specific office provider, all being big industries within the serviced market, for the reasons above it’s potentially likely we won’t be seeing more industry-specific office providers popping up any time soon.