Flexible workspace continues to outperform traditional rents in London

Higher-quality flexible workspace products are continuing to outperform traditional office rents across most London sub-markets, according to the latest Flexible Workspace Return Index, released by flexible workspace consultancy, HEWN.

The report analyses 2025 and five-year performance trends across three grades of flexible workspace 5*, 3* and 1* comparing achieved desk rates and returns with traditional headline office rents.

The findings highlight a widening divide between product quality tiers, with 5* and 3* flexible workspace consistently outperforming traditional rents across most London markets. By contrast, lower-grade 1* products have shown significantly greater volatility and, in several locations, have struggled to maintain returns comparable to conventional office rents.

Will Kinnear, Founder of HEWN commented: “Last year was a tale of two halves in terms of performance. This is the second year we’ve produced this report, and what it demonstrates on a year-by-year basis and across a five years’ timeline, that when done right flexible workspace products can consistently outperform the traditional office market– this year levels reaching over 200 per cent of headline rent, even during periods of economic turbulence affecting the wider commercial real estate sector.”

HEWN’s index combines quarterly traditional office market data with flexible workspace desk-rate data compiled by Valve, technology costs from Office Ready Tech alongside proprietary operational cost data.

“Our data clearly demonstrates the value of flexible workspace. It is no longer a secondary option for landlords and asset managers, it is becoming a strategic advantage for office owners.” added Kinnear.

Across the past five years, 5* and 3* products have consistently outperformed traditional office rents in almost every London sub-market. However, the gap between flexible workspace returns and headline rents narrowed slightly in several locations toward the end of 2025 as traditional rents continued to rise.

Notably, 5* product returns in Canary Wharf, West End and the City reached their highest levels in five years, underlining strong demand for high-quality flexible workspace.

West End

The West End remains the strongest performing flexible workspace market in London, delivering the highest desk rates and available returns.

Demand remains strong, supported by an evolving supply of high-quality workspace.

The 5* product recorded its highest desk rates in Q2 2025, generating returns of approximately 125 per cent of prime headline rents. While returns softened slightly in the second half of the year, they remained above 2024 levels. The 3* segment showed a similar performance trend.

City

The City continued to exhibit strong demand and supply for both traditional and flexible workspace. Product quality continues to be the key differentiator between achievable flexible workspace returns and traditional office rents.

The 5* segment recorded the highest returns of the past five years, reaching almost 200 per cent of traditional prime rents. Despite a softening to roughly 130 per cent in Q4, continued growth is expected as high-quality space is delivered in prime assets. The 3* segment maintained solid performance, with gross returns of 135–150 per cent of traditional rents and net returns of 120–130 per cent.

Midtown

The Midtown flexible workspace market continued to expand in 2025 as new operators entered the area, yet increased supply had no adverse impact on desk rates or returns for higher quality products.

The 5* product consistently outperformed traditional office rents, achieving returns of 150–160 per cent. The 3* market showed similar stability. As the largest product category in the area, it generated returns of 125–135 per cent of traditional rents.

Southbank

For the first time in five years, the Southbank market experienced notable fluctuations in returns, after historically stable performance across the 5* and 3* segments. The 5* market recorded strong growth in the first half of the year, achieving record performance in Q2, with returns reaching 180 per cent of headline rents.

The 3* segment followed a similar pattern, rising to 130 per cent of market rents in the first half before falling to 110 per cent in Q3 and stabilising modestly in Q4.

City Fringe North

Across the market, higher quality products continued to deliver returns above traditional rents, although both desk rates and returns softened in the second half of the year.

The 5* market recorded the second highest returns in Q2 reaching 180 per cent of traditional rents. The 3*market maintained returns broadly in line with the past 18–24 months, delivering gross returns of 110–120 per cent and net returns of 101–111 per cent.

Canary Wharf

Although Canary Wharf has historically shown more volatility than other submarkets, 2025 demonstrated relatively stable performance against traditional rents across all product tiers. 5* product delivered record desk rates in Q2 and Q3 and achieving returns above 230 per cent of market rents. Despite a decline in Q4, gross returns remained high at 185 per cent.

The 3* segment mirrored this strong performance, with returns rising to 150 per cent of traditional office headline rents in Q2 and Q3 before easing slightly in Q4 while remaining above 145 per cent.

Stratford

Stratford continued to underperform relative to other submarkets and the traditional office market. However, flexible workspace returns remained relatively stable at 35–45 per cent of market rents through Q2 and Q3 before declining in Q4.

5* product is limited in Stratford, making direct comparison to other sub-markets difficult; 3* segment delivered positive returns in the first half of the year before falling below zero in Q3.

Kinnear added: “What this index clearly shows is that flexible workspace is no longer an experimental product, it has become mainstream and needs to be carefully considered as part of a landlords offering. When the right product is delivered in the right building and location, the returns can significantly outperform traditional office rents. As landlords continue to rethink how occupiers want to use their assets, flexible workspace will increasingly play a central role in the future of the office market.” 

To read the full report click here.