The flexible office sector has grown as occupiers have demanded greater freedom and functionality. Sophy Moffat reports
Co-working, or flexible offices, is a long-established concept. But it is only in the past few years – through a confluence of factors such as technology, globalisation and greater employee freedom – that what was once a niche activity has become a major commercial real estate sector in its own right.
For example, London has nearly 1,000 flexible office locations, a number that is a result of a rise of more than 10% since 2010 and which already represents more than 5% of total office take-up in the city.
But while London leads, others are following fast. New York, Berlin and Shanghai have all experienced similar rapid growth since 2010 and it is estimated that flexible offices now account for up to 8% of global office take-up.
What is a flexible office? Today, it is defined as temporary or short-term office accommodation that allows companies to expand when they need to, including more permanent office environments that bring different organisations together in a collaborative way.
It is about giving people control and flexibility in their environment. It is also about enabling connections and creating a community beyond corporate meetings. It allows 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.
This flexibility in offices is changing the way organisations in many different sectors work. It is no longer sought only by the tech, creative and media sectors, but also by a growing pool of large corporate tenants coming into the flexible office market for the first time. Technology companies may have been first to customise their own unique experience around a core product, but there is a growing expectation that property should work in the same way.
The rise of co-working reflects the shifting demands of occupiers. They want more from their office – more flexibility, more adaptability, more work settings, more spaces for collaboration, and more of an experience for their staff and clients. Some want to share their office with other companies that can contribute to their development and growth through ideas and collaboration – hence the success of companies such as WeWork, which is currently fitting out its largest office in the world in Moor Place in Moorgate, London.
It is worth considering five key commercial forces that are driving the growth in flexible office space. The first is economics and the requirement to reduce costs and increase efficiencies, especially at a time when commercial office rents have risen and taking on offices with room for expansion is no longer always economically viable.
Then there is simplicity. Not having to worry about the demands of owning and managing property means companies can focus on their core business.
“The rise of co-working reflects the shifting demands of occupiers. They want more from their office – more flexibility, more adaptability, more work settings, more spaces for collaboration”
Location is also significant. Co-working spaces enable flexibility during periods of strong demand for commercial real estate in central business districts that may otherwise have been financially out of reach, for start-ups in particular.
Finally, growth and globalisation of the corporate world are big factors as large employers such as corporates and governments are seeing the benefits for their staff in terms of efficiency and well-being.
There are also cultural factors behind this trend: entrepreneurship and the explosion of self-employment; the proliferation of technology and the growth of digital economy; increasing requirements for connectivity and collaboration, and the growth in professional and corporate networks. Co-working and serviced office spaces help enable these activities.
So what are the opportunities stemming from this growing demand for flexibility? Taking a wider viewpoint, flexible offices is playing an integral role in urban regeneration globally, often at the heart of developing successful new areas.
Looking at four key schemes – King’s Cross in London, Dumbo Heights in Brooklyn, Factory Berlin and Fuxing Plaza in Shanghai – it can be seen that co-working providers are often early-stage tenants, and can ensure the vital injection of business diversity that stimulates many of the economic and social dynamics that follow.
In the emerging markets, where the flexible office concept is still relatively new, there is enormous potential for growth. Developers in Asia have, for example, observed increasing levels of usage as mobile working becomes more prominent in Asian culture and have set their sights on further expansion.
As new cities develop, flexible offices will play an increasingly important role in urban infrastructure.
So co-working is a trend that is here to stay. Corporates, investors and landlords will all need to swiftly adapt their business model and approach to take account of the necessity and desire for greater mobility and flexibility in our ways of working.
Sophy Moffat is associate director at Cushman & Wakefield and co-author of the How You Work report