As the flexible workspace revolution gains prominence at exponential rates, European occupiers are increasingly interested in its incorporation into their business models.
Once considered the domain of start-ups, entrepreneurs and SMEs, flexible workspace is now the buzz word for landlords and occupiers, all eager to cash in or exploit the rise and rise in its popularity and availability.
Flexible workspace, under a different guise, is hardly a new concept. Providers such as BE Offices, this year celebrating 25 years of expertise in the serviced office sector, are veterans of the sector and what are serviced offices if not flexible workspace? However, since 2001 the increase in both the number of flexible workspace providers and square footage has been staggering. The number of flexible workspace sites in Europe grew by 381% between 2014 and 2018 with the number of operators expanding by 338%.
Europewide, flexible workspace comprises just 1.7% of office space, but in a survey conducted by Colliers, 80% of occupiers and providers said they expect increased demand for coworking space over the next 2 to 5 years. In Germany in 2017, coworking space accounted for 5% of total take-up, growing to almost 7% in 2018. Amsterdam as seen a marked shift in the preference for coworking space over business centres, with 10% of take-up volume being for flexible space. Meanwhile in London, WeWork is now the largest occupier of office space.
As the number of flexible workspace operators and sites evolves quicker in some European cities than in others, why are occupiers switching their preference to flexible workspace and how will this impact the market for both occupiers and operators?
Why flexible space?
The rapid rise of the gig economy since 2011 is a key factor. Across the EU28 countries, temporary, part time or agile working accounts for 44% of total workplace-based employment. These agile workers require agile workspace and the market has been quick to respond.
A rise too in scalable project-based teams has seen corporate occupiers venture out of their corporate HQs into the flexible workspace arena for the swing space they need to fulfil client project demands.
Then there are the occupiers who want to be in flexible space simply because it’s ‘cool.’ Millennials are attracted to the Shoreditch style, stripped back space, where the dress code is relaxed, and an afternoon beer is not only permissible but freely provided. This is a generation who expect to move jobs every two or three years so for employers, attracting or retaining the best talent can rely a good deal on the environment in which that talent is working.
Operators have been quick to capitalise on this. Jonathan Weinbrenn of flexible workspace provider BESpoke summarises;
“The most striking impact of our sector is customer centricity; for the best operators, it’s always been what sets us apart from the conventional market.
“Operators that can exceed customer expectations, understand their client’s specific circumstances, resolve conflict, minimise customer effort and empathise with their consumers – it’s these operators who in my opinion, will be the winners.”
Putting real estate in the spotlight, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB), as of 2019, require the disclosure of a company’s lease obligations for real estate and major assets. This ruling increases the visibility of real estate strategies with a focus on how space is utilised, forcing multinationals to reduce the core space they are taking on traditional long-term leases leading them to rely on flexible workspace operators to bridge any short-term headcount swings.
The multiplicity of European operators is enormous, with IWG and WeWork among the most active. London by far has the biggest volume and diversity of space totalling 5% of all European stock, and with traditional landlords developing their own brands the market will continue to expand.
Jonathan Weinbrenn continues to be optimistic for the future, despite the ongoing Brexit uncertainty; “The debate continues to be dominated by Brexit but if, for just a minute, we put aside Brexit, it’s clear that we have experienced a structural change totally independent to whether the UK stays or leaves the European Union.
“Ever since the collapse of Lehman, we have seen near cataclysmic events impact our lives on an almost daily basis; all of which have rocked our world.
“We are living in increasingly uncertain times and this atmosphere of instability, drives us all to look for flexibility and agility across all our decision-making processes; both personal and professional – and this includes across real estate.
“So, Brexit aside, I can only foresee an increased appetite for more agile, customer centric property solutions driven by the needs of the client – and not dictated by the intuitional market. The space as a service model will increase its market share as it rightly challenges a cumbersome and onerous traditional model that has dominated historically.”
Brexit image courtesy of Shutterstock