The drive for more agile working practices that has been accelerated by Covid-19 is likely to see the demand for flexible office space to rise.
While many workers are happy to continue working from home, with a recent study finding that 88% want remote working to continue in some form, many are keen to get back to the office. Human and social interaction and office facilities are cited as being the reason that many workers want to go back to their workplaces.
Although flexibility and the idea of agile working didn’t come about as a result of the Covid-19 pandemic, the recent lockdown and advice to work from home if you can have accelerated the adoption of these ways of working. More people have now had a chance to see how flexible working can benefit them, meaning they are reluctant to return to their previous 9-5 in the office.
This means that agile working strategies are expected to continue to rise, which is likely to result in a higher demand for flexible office space. In fact, a new report from JLL predicts that 30% of all office space will be consumed flexibly by 2030.
According to JLL, Covid-19 has had a big impact on real estate and the flexible space market. We’ve already seen that the rise in remote working has seen office closures and reductions in London as companies seek to offload excess space. This and the drive to continue working remotely means that the trend for flexible office space is only being accelerated.
However, it is likely that the demand for flexible spaces will be in a different form than before the pandemic. Covid-19 will also result in short, medium and long-term implications for the real estate sector that will need to be taken into account.
As JLL’s report points out, just as traditional offices have largely been abandoned since lockdown, so have flexible workspaces. With lockdown’s coming into effect across the world, priorities shifted more toward employee health and wellbeing, meaning that fewer people were looking for shared offices, short-term desks and new flexible space memberships.
As large companies seek to save money by cancelling memberships and smaller companies and freelancers opt to work from home, coworking companies are set to face a tough challenge.
Companies also need to factor in the latest Covid-19 guidelines, with social distancing requirements meaning that many flexible offices will see a reduction in available space for allocation. This means that even though flexible offices can remain open, they will likely be underutilised compared to previous levels. As a result, it is likely that companies who rely entirely on a co-working model will struggle while those with long-term commitments in the form of private office space may be less impacted.
As people begin returning to the workplace, even if it is part-time, flexible office space providers will need to support ‘the next normal’ in the workplace for their tenants, no matter their size or sector. Some flexible space providers are already seeking to do this and to improve brand loyalty by providing remote community services.
With more companies adopting an agile way of working, it is likely that they will start to look for smaller, satellite offices in order to reduce commutes and avoid employees needing to rely on public transport. As flexible office space is easy to acquire, this will likely mean that companies turn to it as a quick way of getting these satellite offices operating.
The continued expected economic uncertainty will also mean that businesses are looking to save costs. Flexible office space providing short-term contracts will help to support these cost-saving strategies. Investors with vacant spaces may also look to repurpose properties as flexible offices in order to make the most of these changes.
The success and popularity of remote working mean that the role of the traditional office has been challenged. However, remote working has shown that the office is still needed as a communal space that can provide social interaction, collaboration and innovation, helping to emphasise the importance of company culture. Offices are no longer just a place to work, they have an important function to play in supporting teams and individuals.
Even before Covid-19 changed how we work, flexible working was being more sought after. The 2019 IWG Global Workspace Survey found that prior to the pandemic, four out of five employees reported that if given two similar job offers, they would take the position that offered flexible working.
This shows that flexible working is no longer being seen as simply a job perk, it is becoming a requirement, which could push more businesses to look into agile options when it comes to offices. As the demand for long-term leases and/or owned assets declines, companies will expect landlords to offer flexibility that reflects their changing businesses.
In addition, the focus on health and wellbeing that has been a trend over the last few years is likely to only increases. This will likely mean that organisations will look to flexible workspaces to better support their efforts in this area.
What does this all mean?
While the flexible office space market has seen year-on-year growth since 2014, it is likely to be limited in 2020 as the effects of the pandemic on office leasing are felt. However, we are likely to see that the demand for flexible space is resilient once the effects of Covid-19 begin to lessen.
Although freelancers will look to save money by losing coworking spaces, 67% of CRE decision-makers are increasing workspace mobility programs and are incorporating flexible space into their agile work strategies.
Once the initial wave of uncertainty passes, we’ll likely see larger flexible space operators re-start their drive for expansion, utilising the availability of office space left as a result of downsizing. This expansion is also likely to be boosted by larger companies being unwilling to commit to large office spaces and the increased need for lease flexibility.
As flexibility remains an important aspect for both employees and organisations, we’ll likely see that the flexible office market sees strong growth.