COMMENT The article in last week’s EG asking whether flexible workspace faces an imminent demise may have come a little early – to borrow Mark Twain’s quote: “rumours of its death have been greatly exaggerated.”
I have been on conference calls with more than 300 operators since lockdown began in markets around the world and their mood is upbeat despite the challenges they face. Like every service-based industry, there are concerns over cash flow in the short term, but the prospects for the long term are decidedly positive.
There is the very palpable sense that the challenges businesses face post-Covid-19 around cost reduction as they rebuild will play to a more agile approach to real estate. This will equate to less leased space and portfolios that adjust to a more flexible commercial real estate strategy. And this has only been compounded by the mass use of remote working, which has shown the technology stands up, teams can work from multiple locations and commuting is finally viewed as the waste of time it really is.
I have also interviewed more than 50 heads of CRE at large blue-chip companies in the weeks since lockdown and they have confirmed that it is more flexible workspace options they require, not less.
Beyond co-working
The growth of the flexible workspace has been the story of commercial real estate in recent times, but too often it has been misunderstood or dismissed as the fad of co-working – business needs a more agile approach to the office of which co-working is only one small element, and Covid-19 very much looks like the event that drives this change forward. Certainly, that is what the majority of flex operators feel at this given time.
Yes, there are challenges to overcome; every operator Instant has spoken to is meticulously introducing the appropriate hygiene and spacing protocols into their workspace. But given the flexible nature of their designs, this is relatively easy to do. And the close relationships that the majority of operators hold with their customers means they are in close contact with them and listening intently to client requirements ahead of the return to work. These are some of the benefits of an agile approach to real estate.
In a market such as the Netherlands, with a flexible workspace market comparable to the UK’s, we have seen demand for flex space return to levels approaching normal in the past few weeks as lockdown restrictions have eased. And this demand is not just from SMEs but larger clients trying to ensure they have a variety of space to cater to staff requirements.
Choice of working environment will be a key component for workers as we rebuild after lockdown and await a vaccine. We may well see different cities or parts of the country locked down intermittently, and having a variety of working options may be the best way to bring teams together or facilitate client meetings. Lastly, are CFOs really going to sign off the capital expenditure required to self-deliver on office space as required when signing a conventional lease? Flex space means your teams are up and running without significant upfront investment.
Asian recovery
There is no getting away from the fact that the economic downturn caused by Covid-19 is causing many businesses to struggle, primarily with cash flow, in the short term. And that is why members of the industry have approached the government seeking relief on business rates. But do not mistake this as being part of a more structural weakness in the market or a lack of client interest.
We have seen already in Asia that market demand for flex space has returned as lockdown has ended, and in many cases it has come back more robustly than before as firms recalibrate. The space provided by operators is allowing them the opportunity to get up and running faster than dusting off their larger, central headquarters.
The flexible workspace industry is well aware of the drivers behind demand for its space – of the need for more business agility, the provision of real customer service, and of a workspace product that appeals to companies of all sizes. None of these reasons have altered over the past few weeks and, from our research, seem to have crystallised among many clients.
This is a significant trial for any element of the office market – we are all feeling the strain in one way or another. But it is also the time for a clear view of the future and the opportunities it presents. There are more than 4,000 office leases due to expire over the next six months – I wonder how many of these clients will right now be considering their options and deciding upon a more agile approach?
John Williams is head of marketing at The Instant Group
