7 November 2018
| By Chris Ireland
How flexible space is leading companies to rethink their real estate. By JLL’s Chris Ireland
As today’s companies aim to become more agile and their workforce increasingly mobile, their workspace requirements are changing fast.
While most traditional real estate portfolios are still made up of longer-term fixed leases, a growing number of companies are experimenting with flexible office space in response to a fast-paced, rapidly-evolving business world.
Whether its introducing hot-desking areas into buildings they already occupy or taking space in an independently owned coworking set-up, companies now have an ever-increasing number of options to re-energise their workspace and their people.
For some companies, flexible office space enables them to act quickly if they need a temporary space, or to position themselves to access new markets. For others, it’s an opportunity to increase exposure to a particular industry or a catalyst for change to their organisational culture.
Our latest research supports our 2015 prediction that flex space could represent as much as 30 percent of some corporate property portfolios by 2030. Major city centres will continue to lead the way, but as demand grows, interest and availability will spread to second-tier cities too.
Catering for 21st century work life
Companies have never had more choice in finding additional workspace that meets their unique needs.
The new generation of flexible space is shifting corporate attitudes with both coworking providers and landlord-created platforms providing high-quality, amenity-rich workspaces that go well beyond merely offering bottomless coffee and a desk. Instead, their networking events, social and dining areas and creative building designs promote a sense of community and encourage collaboration.
And although new formats are springing up across Europe and the rest of the world, we believe integrated technology, workplace data analytics and improvements in how space is used could significantly drive demand and entice companies to diversify their real estate portfolios.
Cost, and other benefits
If flexspace or co-working providers can demonstrate sustained evidence of the benefits companies reap from the spaces they lease, and how this can be scaled, we will see adoption accelerate. In the meantime, these new models are addressing some of the cost concerns that made many corporates reluctant to previously adopt flexible space.
With the new generation of flexible space, our clients tell us that in some cases it makes better business sense to embrace flexible office space than commit to a traditional lease, considering all the operational and capital expenses that can be incurred. With this, some providers are offering innovative pricing and deal structures as they seek to boost demand, although the long-term viability of these remain untested.
For many companies however, cost is not their first consideration. They place a higher premium on the benefits of bringing different teams together in high-quality, amenity-rich spaces.
As flexible space becomes more mainstream, there’s the risk of being behind the curve. As increased mobility, superior connectivity, state of the art fit out and a range of leisure and hospitality services become the norm, no company wants its brand to be perceived as stale.
Finding the right balance
Although more companies are considering or trialling flex space, it’s far from being a one-size-fits-all solution and won’t be the right move for every business, especially those who are very conservative in their real estate operations and outlook.
Indeed, even companies who are more experimental will differ significantly in the way they take-up flexible space.
At JLL, we are seeing a range of strategies emerging based on the needs of individual businesses and even teams. While experimentation continues, and provision remains embryonic in some areas, the appetite for flexible space from SMEs to multinational businesses is increasingly clear cut.
Companies are beginning to recognise that experience-led working environments help inspire and drive the best from people. So, for property investors, the ability to understand the needs of employers and employees will become as important as the asset itself.
JLL’s latest research on flexible space – Disruption or Distraction is available here
Chris Ireland, UK Chief Executive, JLL