The growth of flexible workspace – which includes co-working and serviced offices – is a defining trend for the offices market, driven by tenant demand for different way of procuring and occupying office space.
London has witnessed a growth of 16% in the number of centres offering both co-working and serviced offices since 2016*, according to The Instant Group’s 2017 Global Cities report . There is a huge variety of space to choose from whether the requirement is for one desk in Shoreditch to a floor of space in Canary Wharf.
But while London may be the most expensive city per desk in EMEA, it is only the fifth highest globally, with New York topping the charts, followed by San Francisco, Chicago, and Los Angeles.
What is causing this growth?
A common theme is demand from high-growth companies – many of them come from the tech sector, they tend to have unpredictable headcounts, rapid global expansion requirements and lack an internal real estate team. For companies such as this, they usually started in co-working space and appreciate the speed to market that flexible workspace represents as well as transparency of costs from a single, monthly fee. As they expand they are looking to procure leased space in a s similar way, to keep long-term liabilities down and ensure they have room to contract and expand as their business model requires, not be beholden to a long-term lease.
What Alternatives are Available?
Companies that have outgrown co-working space but are reluctant to sign a lease are increasingly looking at the “managed office”. This is a workspace as service model that applies the principle of serviced offices to the traditional leased model – in effect, the managed office involves outsourcing the procurement and operation of real estate to a third party and being charged a single, quarterly fee that rolls up all the costs of occupancy.
The Instant Group has been running managed offices on behalf of clients such as Avaya and CH2M for more than 10 years and demand has increased as the flexible workspace market has attracted more attention – businesses are realising that there are alternative ways to occupy space.
The managed workspace allows for customisation of the office and services such, and, in fact, are fully branded, while still offering speed to market and reducing the capital expenditure required for leased space.
Companies are turning to third party operators of space such as the Instant Group because of its experience in office fit-out and design but also its extensive supply chain knowledge and servicing capabilities. This includes everything from supporting growth to implementing property solutions for a specific project to expanding into new markets.
“In a fast-paced, high-stress environment like London, this approach allows corporate businesses to focus on running their companies and doing their jobs, while we run the office on their behalf,” John Williams, Head of Marketing at the Instant Group, said. “We run all the costs, fit-outs and leasing over a three- to five-year lease term.”
The Instant Group’s team leverages its network of relationships with local suppliers to facilitate the client’s fit-out. The team covers upfront capital costs, reducing the risk that the client takes on, a boon particularly for companies that have capital constraints and prefer large fixed-costs being amortized into an operating expense budget. The bespoke fit-out process ensures clients can achieve the tailor-made brand effect without having to commit to significant upfront costs and long leases.
“This process is always about agility,” Williams said. “We have worked with organisations from London to Kuala Lumpur, but the client’s objectives are relatively similar. They want assistance locating, procuring and operating their office space to mitigate cost and increase business agility. When office space is the second-biggest cost to most businesses, this represents a significant saving.”
* (figures collated using Instant’s data and market research as of April 2017)
