“Space as a service” appears to be the statement de jour in any conversation with a landlord or developer talking all things offices.
Whilst not a new concept, the increasing demand for the same occupational experience, regardless of size, is forcing many office providers to offer a single holistic service and amenity level, which benefits a much wider market: just as SatNavs, ABS, air conditioning and leather seats are no longer the reserve of prestigious executive cars, but are now expected in almost every car.
By providing an holistic and flexible offer, landlords can now offer everyone a ‘one-stop-solution’ - from start-ups and small companies, to large corporates looking for short term project specific solutions. If you’re looking for flexible short-term leases, access to pay-as-you-use meeting rooms and other facilities, minimum downtime when moving in, no agents/solicitor’s fees or capex, you can have it.
What’s not to like.
As for co-working – the sharing of a working environment with like-minded professionals – the lure of reducing capex, sharing equipment, ideas, space and of course costs can be irresistible, especially to those in the creative sector. However, if you need privacy to create valuable new apps or sensitive paradigm busting ideas, then a co-working environment is probably not for you.
Barely a week goes by without the name WeWork being cited for its mushrooming in London and now Manchester. With almost £2bn in lease commitments across the UK, over the next 25-years and further expansion forecast (perhaps even a doubling of UK capacity to 6m sq ft in 2019). It’s therefore no wonder that this flexi office brand is on everyone’s lips.
A common misconception is the perception that the market is dominated by the large operators (such as Regus, WeWork, Bizspace, Servcorp) when in fact they, collectively, only account for just over 15% of a market dominated by a multitude of smaller players. Let’s not forget landlords, who have started to embrace the flexi space proposition and are introducing it into their space mix.
But, talking to some in our sector I am frequently reminded that:
- Revenue from flexi space is usually lower (in the long run) than that from private offices
- Huge investment in sales is required to maintain volumes and continue to grow the client base
- As start-up businesses start to mature, entrepreneurs inevitably migrate out of flexible spaces towards lower cost conventional leases – where a norm is now five years with a three-year break clause
- The activities of WeWork appear not to diminish despite SoftBank’s (recent) decision not to invest $16bn in the company. It is however still valued at over $20bn, making it one of the largest start-ups in the world. But market commentators consider that the company’s vertiginous growth is unsustainable as its net losses in the first nine months of 2018 had almost quadrupled from the previous year and that the company is “... dangerously exposed to an economic downturn ...”
- “We’ve been there before”, muttered a colleague. ‘’Property cycles are par for the course: 16 years ago, Regus, the household name for serviced flexible office solutions, filed for protection under Chapter 11.”
Today’s flexi spaces are more than just email and paper moving factories. At their best, they create a potent catalyst for:
- Co-presence: working alongside each other
- Communications: in communal areas and at landlord organised events
- Community: the friendships with peers and a strong sense of ‘belonging’ which fuels productivity
- Collaboration: sharing knowledge, contacts and much much more.
And does this combined “... psychological resource...” herald a new age in workplace history?
In a world of increasing on-demand services and the desire for instant gratification, it is hard to imagine this current trend abating any time soon – particularly when so much uncertainty looms on our horizon.
There’s no two ways about it. Flexi offices are here to stay: just as the fast food sector evolved and today offers consumers choice, speed and varying levels of sophistication (from a simple burger, to burgers with truffle mayo and chicken skin; with or without fries; with or without salad; with or without etc etc) ... so the flexi office offer is evolving and gaining traction and market share. The sector already offers a rainbow of services from the functional to high spec, high value accommodation, in the most prestigious parts of town.
And therein lies the challenge. In a world where companies are using the workplace as a brand statement and a point of differentiation, how can the commoditized product of a serviced office continue to attract the more discerning consumer?