EDITOR’S COMMENT If I was Jeff Bezos and I’d turned a business launched in my Seattle garage in 1994 into a global business with revenues in excess of $125bn (£92bn), I would probably take a back seat too.
If I had led a company that completely disrupted not just the world of retail but also made, perhaps, the biggest impact on the world of real estate, I would probably think it would be alright to have a little rest.
I would be thinking that I came, I disrupted, I became the apex predator and survived – thrived, even, when those around me crumbled.
If we have learnt anything from the past 10 months, it’s that leading is vital to survival. There is no room for laggards, for those who are slow to adapt, for those who didn’t plan.
It is a harsh way to look at life, perhaps, but the truth is often harsh. And we’ve seen it this week in flex office provider Knotel filing for Chapter 11 bankruptcy in the US.
The world of flex offices is an exciting and innovative arena to operate in. It probably is the future of offices and our approach to working, but the market has become flooded over recent years and many operators have tried to follow the Amazon model of dominating the arena. Taking huge amounts of space.
But unlike Amazon, flex space is not being filled to the rafters right now. We need to buy stuff – we just can’t help ourselves – but we don’t need to go to an office to work. We want to and, let’s face it, lockdown three has probably been the best thing that could have happened to the office market, but it has been proved – on a global scale – that we just don’t need to.
I doubt that Knotel will be the last well-known flex operator that we will see get into trouble over the next 12 to 18 months as the true impact of a year without real occupation starts to take effect.
As James Rankin, head of research at The Instant Group, says: “Nearly every industry goes through a period of M&A activity at some point as consolidation is used to drive new opportunities, leverage new technologies, introduce economies of scale and, importantly, capture new markets. 2021 is shaping up to be that year for the agile workspace industry.”
And it’s the irony of flex space that will likely bring some of its demise about. Operators such as Knotel acquire huge swathes of space in buildings in major cities from which to operate on a flexible basis for their tenants only to realise that when times get tough, they can’t flex. That they may have spent large sums of capital on creating these beautiful, functional workspaces, only to realise that flexible deals mean easy come, easy go and, for the past 10 months, it has been a whole lot more of easy go.
Early on, when lockdowns were still unique, EG penned a piece questioning whether the end of flex space was nigh. Whether the disrupter had become the disrupted.
There was, of course, some pushback. Flex is the future, tweeted the flexitarians, the regular office is dead. Everyone wants to work in a flex space. Let’s turn all our empty shops and department stores into flex. If we provide it, they will come.
But now the sector really is facing a pivotal moment that will see that gap between the leaders and the laggards widen. Flex will, no doubt, continue to form a vital part of the office footprint, but as take-up tumbles (and keep an eye out next week for EG’s comprehensive analysis of the London market in 2020) only the fittest will survive.
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