Birmingham's Flex Test

Coworking and flexible office provider Cubo is the latest to join the 1M SF-plus Birmingham flex workspace sector — but it does so as the flex market faces a pandemic exit wave.

Cubo has taken a 12.5-year lease for the 24K SF fourth floor of MEPC/Federated Hermes’ Two Chamberlain Square. The new Birmingham hub adds to a network that includes Derby, Nottingham, Leeds and Sheffield. The deal represents a doubling of Cubo’s initial requirement.

Cubo was founded in 2020 and like many new flexible workspace offers is busy establishing a national network.

The Birmingham flexible workspace sector has more than doubled from an estimated 500K SF in 2018, half of which was Regus/IWG, to more than 1M SF today if all users are included.

Cubo is one of a large minority of the flex workspace sector prepared to sign traditional leases. The reliance on traditional leases, as opposed to management agreements, was held to be part of WeWork’s undoing.

Experts suggested leasehold operators face a tougher challenge, and also questioned the preference for building national networks. 

Earlier this month NewFlex chief executive Steve Jude told Bisnow this was a danger moment for the post-pandemic flex sector. 

“It’s more than plausible that this is the real moment of stress, not the pandemic. We have a risk-light business because Citibase had a near-terminal moment in the Great Financial Crisis of the noughties,” he said.

“We learned that the leasehold model comes with enormous risks if the cycle is against you. There could also be risks in management agreements if landlords see opportunities to let that floorspace on a good lease — and if they can, we’d encourage them to take it.”

The Paradise redevelopment is being brought forward through Paradise Circus Limited Partnership, a private-public joint venture with Birmingham City Council. The private sector funding is being managed by the international business of Federated Hermes, which has partnered with the Canada Pension Plan Investment Board or CPP Investments, on the three commercial buildings. MEPC is the development manager.