Flexible offices: The future or future problem?
Occupiers, from start-ups to large corporates are embracing the coworking phenomenon as working practices have quickly become untethered to a specific place and demand for flexibility grows.
2 minutes to read
Flexible office operators have become a major feature of the South East offices market. Operator take-up accounted for 16% of the South East total in 2018, more than four times the long-term average for the business group. Occupiers, from start-ups to large corporates, have embraced the growing phenomenon as working practices have quickly become untethered to a specific place and demand for flexibility grows.
This shift toward flexible working goes beyond simply outsourcing to a third party provider. As working practices change, so the role of the workplace evolves in order to meet future needs. Flexibility is foremost, meaning the presence of a third party flexible office provider (as a tenant integrated in a multi-let building) is acting as an attribute and therefore an additional tool for landlords to attract new tenants. Not all landlords, however, are ready to relinquish this level of control in their buildings. As such, landlords themselves are entering the sector creating their own flexible, service orientated brand.
While occupiers have been quick to embrace the changing work environment and the concept of co-working, investors have typically been more averse to the concept. The perceived danger is that when an economic downturn appears, demand will reduce and weaker covenants are quickly exposed. That could leave providers of flexible offices with large amounts of unlet space, which they might need to close or renegotiate to reduce costs. Larger property firms consequently would be indirectly exposed.
On the other hand, some investors have sensed an opportunity. For example, British Land launched “Storey” in 2017, which offers shorter flexible leases to small companies. Private-equity firm Blackstone also acquired a majority stake in flexible office space provider The Office Group. Each respective strategy, whether within a building or in gaining access to the sector, has its advantages and disadvantages.
What is undeniable is that occupier focus is changing and flexible approach underpinned by strong service offering is now required.
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