Across Europe, occupiers are increasingly looking at how flexible workspace becomes part of their business model. No longer simply an option for entrepreneurs, start-ups and SMEs, flexible workspace is gaining prominence – where the ever-growing focus on digital, new leasing models and an increased focus on flexibility – both in terms of workforce and business focus – is championing the flexi-workspace revolution.
While flexible workplace/serviced offices are certainly not new concepts, this niche area has expanded rapidly since 2001 – both in terms of the number of sites and sq m of space. The biggest jump happened over the last five years. Between 2014 and the end of 2018 we saw a 381% increase in the number of flexible workplace sites across Europe – while the number of operators has expanded by 338%.
Interestingly, across the whole of Europe, flexible workspace remains a small proportion of the office space offer – just 1.7% total office space, on average, at the end of 2018 (across 22 major cities). But its growing fast. Germany is just seeing the start of the flexible workplace evolution, but 80% of occupiers and providers surveyed by Colliers expect demand for coworking space to increase over the next 2 to 5 years. And the figures reflect this. Coworking spaces accounted for 5% of total take-up in 2017 (around 200,000 sqm), and in 2018 this grew to almost 7%. In Amsterdam there has been a marked shift from business centres to coworking spaces. The take-up volume of flex-desk concepts has been around 10% of the total take-up volume for a few years already. And in London, with flexible desk space priced at a premium to conventional rents, you would have to be blind to miss the march of We Work, now the largest occupier in London.
As flexible workspace grows in terms of space and operators, evolving quicker in some cities than others, why are occupiers choosing flexible workspace and what is the long-term impact of this market for occupiers and operators alike?
Rise of the gig economy
This last economic cycle (since 2011) has encouraged the rapid evolution of the tech/gig economy – where part time, temporary, more agile working now accounts for 44% of total workplace-based employment across the EU28 countries. Full-time employment now accounts for just over half (56%) of the existing EU28 talent pool.
Corporate flexibility vs a Pioneering Position
Many organisations have recognised the need to be increasingly flexible to respond to business change – this has seen rise in project based teams who can scale in terms of size, staff and skills as required. Some occupiers see the benefit of flex and coworking differently. James Ainsworth of PWC explains ‘A business such as PWC does not standardly utilise these sorts of flex space. Compliance and data security are primary concerns and PWC work is undertaken almost exclusively within PWC’s leased estate, on client site or from home working. (Flex Workspace) will be considered for short term space pressures, or new market penetration… to support rapid expansion pending longer term strategic acquisition, or to accommodate conflicted projects that needs to be off-sited.’
Put simply, its cool
Millennials and fresh talent want to work for companies offering ‘cool’ flexible space – it makes them more desirable. As a generation who embraces change, many expect to move jobs within 2-3 years, or have more than one job – so in the race for this talent pool, providing the very best in flexible workspace could be a deciding factor in winning or retaining the best talent.
The operators are capitalising on this. As Jonathan Weinbrenn of flexible workspace operator Bespoke summarises, ‘The most striking impact of our sector is customer centricity; for the best operators, it’s always been what sets us apart from the conventional market. Operators that can exceed customer expectations, understand their client’s specific circumstances, resolve conflict, minimise customer effort and empathise with their consumers – it’s these operators who in my opinion, will be the winners.’
Government support for flexibility and innovation
Across Europe, governments are supporting and funding start-ups and SMEs to help stimulate economies and growth through flexibility and innovation.
New accountancy rules put real estate in the spotlight
As of 2019, the Financial Accounting Standards Board (FASB) and International Accounting Standard Board (IASB) will require businesses to disclose lease obligations for real estate and other major assets. This increases the visibility of a company’s real estate strategy, putting a spotlight on how space is used and pushing multinationals to take less core space on traditional long-term leases and rely on flexible workspace operators to deal with temporary headcount swings.
Across Europe we are seeing a large diversity of operators, with IWG (International Workplace Group inc. Regus) and We Work being the most active. Currently London has by far the biggest volume and diversity of flexible space – 5% of all stock – and with traditional landlords such as L&G now developing their own brand, Capsule, in order to compete, it looks only set to grow.
Brexit is of course on everyone’s minds, and its something the operators are considering. As Sally Carter of Leo comments, ‘Clearly all eyes will be on Brexit – or no Brexit….In some ways uncertainty can be beneficial to the serviced offices sector, given the flexibility on offer. However, a growing and stable economy that supports business confidence is the best long-term outcome for London and our industry.’ So as landlords develop their own concepts and corporate occupiers change how they use their space, we are presented with massive opportunities for the market. If harnessed, these could create seismic growth for the growing use of flexible workspace by the whole industry. Find out more about the alternative leasing options multinationals are now looking at – from flex and core to city campus – and how different cities across Europe are adopting flexible models of working.