By Sophy Moffat, Associate Director of Research, United Kingdom
The world of work is changing. Flexibility is no longer sought by the tech, creative and media sectors alone, but by a growing pool of large corporate tenants coming into Serviced Office and Coworking Spaces for the first time. Outlined below are the commercial and cultural factors behind this phenomenon.
The Global Financial Crisis (GFC) forced many businesses to reassess their financial commitments and, in particular, their real estate. Office consolidations and closures enabled companies to realize immediate cost savings, while the introduction of flexible working solutions offered long-term strategic benefit. Flexibility by way of short lease occupancy, remote working, hot-desking and ad hoc space rental have proved highly effective in reducing costs and managing uncertainty.
“The ability to take up space quickly and minimize long lease liabilities means that Flexible Offices are now an integral element of a company’s property portfolio.” — Will Duncan, Head of Broking at the Instant Group
With digital commerce easier than ever before, consumers now expect the same level of immediacy and simplicity across all transactions, including property. Company incorporation rates are at record levels since the GFC, averaging year-on-year growth of 4.2%, and Flexible Office providers have sought to meet the requirements of speed and ease with streamlined check-in processes, often down to a few simple clicks. The plug-and-play nature of the Flexible Office setup enables tenants to focus on their core business from the outset, rather than on contractual administration, making it an ideal choice for startups, scale-ups and multinationals alike.
“I don’t have to find a space, furnish it, connect IT and all the other things that go into setting up an office. It boils down to the convenience. The Flexible Office is ready-to-work.” — Bill Earnheart, Vice President of U.S. Retailer Neiman Marcus and a Regus customer
The GFC triggered a decline in construction globally by 5% in developed markets. The effects are still being felt today despite renewed development activity and market buoyancy. A subsequent shortage of Grade A office supply in all global financial centers has sent office rents in Central Business Districts (CBDs) soaring by an average of 10.1% in the last two years. A 7% rise in the number of commuters from the suburbs into CBDs over the past decade has added a further pressure on global city infrastructure.
“A well-known electronics company makes use of our Coworking offering. The company has their main office outside London, and their product design team had an office in Central London. Once their lease ended, they decided to use Club as their London base, which gave them the flexibility to work in both the city and their headquarters.” — Andrea Kolokasi, Workspace Group, London
Though business is enjoying a global resurgence, conventional offices in high-demand locations have become prohibitively expensive for most small companies. Coworking Spaces and Serviced Offices, however, have the potential to relieve much of the strain. Remote working for employees alleviates the requirement to commute to the CBD from suburban areas. This could benefit both employees and employers due to increased efficiency from reduced travel time and lower rents in fringe locations.
“There is massive potential in our network of offices within corporate real estate. One of our tech customers is moving out of our space in Dublin and transferring that capacity to Singapore and Sydney in a short space of time. The ability to do that is unique, since it is only really possible to do that within one global operator.” — Ben Munn, Regus plc
It has long been necessary for multinationals to have a physical presence in the regional markets they operate in. Flexible Offices have proved effective entry-level solutions, particularly through global office networks that operate universal standards of service. Tenants have the option to expand or relocate quickly, with little upfront capital or commitment.
“Using Regus is simple, cost effective and does not require a long term commitment that either hinders growth or wastes money on unnecessary space. Flexible Offices make setting up in a new country low risk and hassle free.” — Wolfgang Gollub, Senior Manager of Toshiba Europe
A ‘passport’ system across a given network enables employees to connect and work from different local, national or international locations as determined by their task. Regus’ Businessworld and WeWork’s Commons membership provide customers with access to a global network of offices. The flexible office market is proving best placed to manage globalization, mobility, fast-paced growth and risk, and operators compete to provide the most effective network and service.
Flexible working has been embraced by large companies and national governments as well as cost-conscious startups. Corporate giants BT and Bank of America are just two examples of companies that have adopted flexible working practices and enshrined them in employee contracts, where employees have the option to work remotely and adjust their working hours.
“Flexible working is central to BT’s competitiveness. Not only does it help us continuously improve our cost base and productivity, but it also brings important human benefits, such as a better work life balance, and underpins the resilience of our business in turbulent times.” — Dave Dunbar, BT
Against the backdrop of a largely traditional business culture in China, Shanghai has been coined a ‘Free Trade Zone’ by the government, where it will pilot flexible working across a number of industries in the hope of realizing commercial gains. Restrictions on standard hours of work have been lifted for certain sectors, allowing employees to shift their working day. Similarly, in 2014 the U.K. Government introduced the right for all employees to work flexibly, a benefit previously reserved for those with parent or caring requirements. Advocacy by corporate organizations and governments alike will help fuel the growth of the Flexible Working industry globally.
06 Recruitment & Retention
38% of employers globally believe that the single biggest challenge facing their business today is recruiting and retaining talent. With millennials expected to make up 75% of the global workforce by 2025, businesses are adapting their workspace strategy to align with the cultural values of this future. The Catch Me If You Can survey by Regus shows that 72% of respondents feel flexible working attracts top talent, and 74% believe that it improves employee retention. Remote locations allow employees to move between corporate headquarters and Flexible Offices at their discretion, depending on the type of work expected. This allows employees to have a balance between a necessary corporate environment for meetings with line managers and clients, and an alternative creative space for project work.
The Flexible Office market attracts a diverse tenant mix, and in doing so, connects a variety of complementary services under one roof. Members have access to invaluable professional networks, while proactive operators will introduce their customers to potential partners and customers within their portfolio, understanding a highly integrated network is advantageous to their business as well as to their members.
“Being in a Coworking Space has improved my company’s network particularly on the funding side of the business. It has created more connections to venture capitalist funds, which is critical for us to expand and grow.” — Chantelle White, Senior Vice President of YouAppi, New York
The Flexible Office market has for over 30 years sought to provide growing businesses with an effective alternative to the traditional office. Its latest incarnation is more attuned to human needs than ever.
Steve Quick, Head of Occupier Services at DTZ explains, “As businesses adjust to the realities of increasing rents and the rapid pace of a globalized, technology-enabled market, the biggest challenge they face is not in fact cost or mobility, but people.”
This trend is not simply about creating open plan layouts or adding a café. It is about giving people control and flexibility in their environment. It’s about enabling connections and creating a community beyond corporate meetings as well as allowing people to work in ways that give them choice, meaning and purpose. At a time of global skills shortages when employers are striving to attract and retain the world’s top talent, this matters. Flexible Working principles can help surmount a range of challenges, and the values espoused by the industry will become increasingly important.
For more about the growth of the flexible office sector from the business center of the 1980’s to the coworking space of today, download DTZ’s latest report: #HowYouWork and join the conversation @DTZ.
Sophy is an Associate Director of Research, and her team produces studies on the central London economy, capital markets, occupier market and factors that affect supply-demand fundamentals in commercial real estate. Sophy has produced research for investors including St. Martin’s, Ho Bee and Dekabank and has authored various published reports that identify workplace trends. Sophy is regularly featured in the UK national and trade press and frequently speaks about the future of the workplace at industry events.