Article first published in October 2019. Article updated in October 2020.
“The move towards the flexible use of space is where the market is going.”
Thomas Sinclair, Group CIO and Global Head Network Development at IWG believes that the rapid expansion of the serviced office space has been one of the defining trends for the property market. Growth that is expected only to reach new heights following the huge uptick in remote working seen during pandemic, alongside changes to the International Financial Reporting Standards (IFRS), which have made lengthy leases less desirable for many corporates.
For landlords, the advantages are abundant. Prospective tenants are increasingly attracted to, and less likely to leave, sites with flexible workspace, lending landlords a more secure stream of cash and an increased valuation of their building.
Tenants meanwhile can reduce their upfront spend on ancillary expenses such as outfitting and adapting their office space, gaining all of the benefits from maintained space with socially-distanced areas such as coworking and breakout rooms.
Flexible workspace also diversifies a real estate portfolio. In the past, many companies were only willing to lease property in global hubs. Though Paris, New York and London are still in demand, ‘secondary cities’ and suburban towns are gaining traction among property directors as firms seek out lower rents, better national coverage and satellite offices nearer that give employees the option of working closer to home.
Cities such as Manchester, Lille and Frankfurt have seen serviced flexible working space supply grow by 15% as a direct response to this trend, while Oklahoma, Kansas and Nebraska in the US all reported growth rates of more than 20% in 2019. While 2020 may have seen a drop in expansion as a result of widespread ‘work from home’ mandates, this is likely to be short-lived, with experts anticipating a bounce back once infection rates are brought under control and employees are encouraged to return to the office.
Tech advances are also a part of this flexible workspace revolution, where innovations in video conferencing, cloud computing and online organisational programmes offer remote employees working from flexspace all of the necessary tools to be just as productive as if they were in a central HQ.
For landlords, this transformation brought about by cultural shifts and sheer necessity as a result of the pandemic, offer ripe opportunities to lease office space in districts that might have been previously considered “subprime”. Clients meanwhile will benefit from additional choice in a growing portfolio of flexible workspace.
“This is a trend that is enabled by technology and a trend that we believe is here to stay,” says Sinclair. “This is not only a trend we believe landlords need to and want to embrace. We also believe it adds values to their businesses, their locations and their assets by properly and efficiently monetising their space.”
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