NEWSPublished November 1, 2019
The Evolution of Flexible Workspace
David Garson, Head of Enterprise EMEA at Office Freedom, hosted a masterclass at the Workplace X Summit to discuss the evolution of flexible workspace. Exploring how workspaces have changed over time, David shares an insight into the factors driving rapid market growth and what’s next for the industry.
“I wasn’t sure whether to call this the revolution of flexible workspace, because I think we’re at the beginning of a revolution – of a real change we’re seeing in the way people work,” David says.
Flexible workspace encompasses serviced offices, flexible leases, virtual offices, meeting rooms, managed offices, coworking and day offices.
“The buzzword seems to be coworking,” David explains. “If you’re putting an ad on Google at the moment, you’re going to be paying a lot more if you use the word ‘coworking’ than you would for ‘serviced offices’.”
David shares images of a classic office, with a basic cubicle for each employee. “I can’t think of anything worse now than working in that environment,” he admits.
He compares these photos to examples of new offices, from different providers, each one featuring lots of natural light, plants, different working areas and breakout spaces to create a more pleasant working environment. “It’s really changed now,” David says. “Serviced office, flexible workspace, coworking – it’s a really nice place to be.”
David believes these changes are the result of four factors: competitive pricing; staff wellness; branding; and large requirements.
“Pricing is one of the most interesting things,” David says. “One of the main reasons is stock. We had very few providers a few years ago. Now, if you look at London alone, we’ve got 1,500 offices to choose from. We’ve got 300 providers on our books at the moment and that’s growing all the time.”
David adds that there is an oversupply in certain areas, such as Canary Wharf, which lowers prices and encourages startups to choose offices in these locations.
Service levels have also improved, with short-term contracts meaning businesses can move if they aren’t happy with their provider. “This has really helped people to focus on their business,” David says.
David discusses the burden of a lease, with fixed terms, multiple parties involved, high costs and many different documents required. “When you look at serviced coworking, you don’t have these,” he says. “So you can concentrate on your business.”
With studies showing that staff wellness leads to increased productivity, this is now a priority in many offices.
David believes breakout spaces have almost become more important than the office space. “In our office, there are people sitting with laptops on beanbags,” he says. “There are plants everywhere, which we’ve never really seen before. There are refreshments, water stations, fruit and veg everywhere. We’re interacting with people.”
Referring back to the photos of coworking spaces he shared earlier, David draws attention to the natural light. “There was lots of light everywhere,” he says. “It’s a nice environment to work in – you want to come to work. You want to be there.”
Other additions to offices include showers, bike storage, roof terraces and gyms. “Staff can go and use the gym and meet other people,” David explains. “We’re finding that people are getting into work earlier and they’re staying later. They’re going to the gym at lunchtime and coming back refreshed. They’re taking less sick days as well.”
David also mentions the increasing requests for pet-friendly offices. “More and more people are saying to me, ‘we have a dog, can we bring a dog in?’” he says. “We’re seeing more providers gradually changing as well. Everyone seems to have an office dog – or two, or three, or four in our case!”
The changes in operator branding have had a big impact on flexible workspaces. Occupants can now make the offices their own with a range of branding opportunities available. “If I’m running a business, I want people to walk into the building and think it’s my building,” David says. “It’s not run by an operator with a huge sign at the front.”
David refers to Amido, a company that had their office fitted exactly to their specifications with their branding featured throughout. “They had their sign up in lights,” he explains. “You would not know it’s a serviced office. People are stamping their own identity on it; they’re making the office their own.”
A common view of the flexible market is that it is only for small companies – perhaps just five or six employees. David believes this is now changing, where 25-year leases no longer make sense for big companies.
“I don’t think that people know where their growth is going to be beyond one or two years – and why should you?” he says. “Things are moving so fast, why would a CEO and a CFO have a plan that realistically they’re going to know where they are in 10 or 15 years? People are looking at different ways to address their property needs, and challenging the lease.”
Property used to be an asset but is now starting to be seen as a liability. “We’ve done work for IBM, Amazon, Microsoft, Google, Apple, Starbucks – we’re seeing these blue-chip companies readdress the way they think about property,” David explains. “By 2030, 30% of office space operated by the corporate sector is expected to be flexible workspace.”
Huge investments have been made into the industry; a trend that David says is happening across the globe. “Global demand for flexible space has increased 50% in the last five years, which is astonishing,” he says. “We’re only at the tip of the iceberg. We’re talking about global market estimates to top 25,000 spaces by 2022 – we’re at 15,000 at the moment. It’s a big amount of growth in a short space of time.”
London is considered to be the capital of coworking, with a new space opening every five days. “We’re seeing huge amounts of growth across the board and only 20% of the whole of London stock is flexible at the moment,” David says. “We’re seeing landlords react now and realise they’ve got to offer more flexibility.”
David shares some other factors that are affecting market growth. “Brexit – what has really helped the market is that nobody knows what’s going to happen,” he explains. “You can’t really plan that far ahead. We haven’t known for the last three years what’s going to happen, and that’s helped this market give flexibility and growth.”
A new accounting regulation change, IFRS 16, has also had an impact. “It means that a lease now has to go on your balance sheet,” David says. “Which means a lease is now a liability. It’s not an asset anymore.”
People want increased flexibility and agility, with the Millennial workforce driving change. “When I started work, I was grateful to have a job,” David says. “With Millennials, it’s about ‘how are you going to keep us? What are you going to give us to stop us going over the road to the other agency?’ We have gyms, we have roof terraces, we have fruit – we have all these things that people like.”
The speed at which technology is growing also has an impact. “Technology is changing everything,” David explains. “The way we do things, how fast we move – everything in life. It’s also changing how we perceive office space.”
The demand for flexible working has resulted in an employee power shift, with four out of five people saying that, when faced with two similar job offers, they would turn down the one that did not offer flex working.
“Over half of employees globally are working outside of their main headquarters 2.5 days a week,” David adds. “People want that flexibility. They want the ability to work from home, which is why we’re seeing more hotdesking within a private office space. 85% of employees said their productivity increased as a result of greater flexibility. We’re definitely seeing this.”
The next stages in the flexible evolution will see new operators entering the market, more niche and bespoke spaces, and employees demanding more flexibility.
Corporate growth will also continue, with 60% of individuals in coworking spaces expected to be part of large organisations by 2022. “This is phenomenal,” David says. “Corporate growth has shunned serviced offices and coworking for so many years, and now we’re seeing the growth really accelerate.”
David finishes his session with more details about Office Freedom.
“The thing that attracts everyone’s attention is ‘no fees for clients’,” he says. “We do not charge you a fee if you come to us for a consultation and take an office space. We charge the landlord. This model works well for us.”
Office Freedom is 26 years old and was the world’s first global flexible office brokerage.
“I often say we’re like Compare the Market,” David says. “We’re an aggregator. We’re completely impartial and we’ve got more than 13,000 properties listed worldwide.”
Check out David’s full masterclass at the Workplace X Summit 2019.