Flexible Workspace Digest: Market Insights and Perspectives
By essensys Team · 02.04.2021 · 10 MIN READ
April 2021 by Amanda Fanoun
The Future of Cities, Work and Office Space
Real estate and technology thought-leader, Dror Poleg, spoke on The Prof G show with Scott Galloway to discuss the future of Cities, Work and Office Space. Dror addresses the impact of technology on unlocking flexibility across real estate assets to meet customers’ increasing demand for services, agility and design. The conversation addresses the potential returns for real estate owners and operators that can de-risk assets and attract and retain customers.
Global occupier survey points to office-first hybrid policies
Cushman & Wakefield recently surveyed over 300 global occupiers and members of CoreNet Global to understand what the post-pandemic workspace ecosystem will look like. The research underlines the changing role of the office as a place to foster corporate culture, collaboration, innovation and creativity.
More than half (58%) of global respondents will take an office-first hybrid approach to work to foster greater flexibility. However, the future of the workspace is not one-size-fits all. The backbone to support such flexibility is technology that can efficiently connect people across locations, enhance collaboration and support seamless access to different types of employees and their work.
Tenants are demanding more of their landlords – flexibility, shorter term leases, more services, and safer, more secure workspaces. Landlords and operators are scrambling to weigh the risks and benefits of rolling out flexible propositions that can help attract and retain tenants. In this 2-part podcast, Franco Faraudo at PropModo speaks with the movers and shakes of flex as they highlight the challenges of this approach to office space.
Deloitte: Digital Transformation and Tenant Experience are a Business Imperative
In the latest CRE Outlook from Deloitte, 200 industry leaders shared their insights on how their companies are recovering from Covid-19. The findings show that the pandemic has accelerated the use of technology in the CRE industry, but for 56% of respondents it also uncovered shortcomings in their company’s digital capabilities and affected their plans to transform.
The pandemic has also made improving agility a top priority for CRE, which requires companies to focus on the digitisation of key business processes as well as the tenant experience, for example through the use of apps. While many companies are now planning to accelerate digital transformation, only 40% have defined a digital transformation road map. In addition, only one third of respondents believe they have the resources and skills required to operate a digitally transformed business.
To strengthen operations and build trust with tenants, the report suggests companies should look to adopt a structured approach to digital transformation, bolster cybersecurity and data privacy efforts, and use analytics to make data-driven decisions.
With the right technology, flexible workspace providers can speed up their digital transformation, by simplifying and automating core processes. The right technology will also avoid the need for complex supply chains, outsourcing partnerships or large technology teams.
Read more from the Deloitte 2021 CRE Outlook here.
Optimism in Flexible Workspaces on the Rise for Landlords
Savills recently published the results of their Landlord Flex Survey, looking at the importance of the office and future prospects.
As the pandemic has progressed, the perception of how people will return to the office has evolved and while acceptance of working from home has increased, the importance of the office has also been reinforced. Businesses know the office is still important for maintaining the right culture, and employees still see its value in terms of collaboration, mentoring and networking. A hybrid model of home and office working has emerged, for which the flexible workspace market has a major role in delivering.
And landlords have obviously seen this potential. 62% are optimistic towards the flexible office sector, and while 29% already operate a flexible offer, a further 29% would ‘like to’ or ‘are planning to’. But this doesn’t mean landlords are looking to go it alone. Nearly a third consider a flexible workspace operator as important, while another third consider the presence of an operator as a ‘nice to have’.
Read more about the survey and download the report here.
Shaping Human Experience – Hybrid Work and Four Emerging Worker Profiles
Also focusing on the emerging hybrid work model of home and office working, JLL’s recent ‘Shaping Human Experience’ report identifies four unique worker profiles, characterised by their appetite for home working:
The Traditional Office Worker wants to work exclusively in the office, demanding in-person activities and an office-centric work pattern.
The Experience Lover demands high flexibility and consider the office as a key destination. They want to be at home one or two days a week.
The Wellness Addict puts their work-life balance first, demand flexibility and choice, and prefer three to four days at home.
The Free Spirit has the biggest appetite for remote work. They demand full empowerment and a work-from-anywhere working pattern and want to work full-time from home.
As the JLL research shows, without careful management frequent remote working can have a negative impact on workforce morale and productivity. But with over half of employees falling into the Experience Lover and Wellness Addict profiles, the challenge for employers will be finding the optimum balance of remote vs office work to maintain engagement, commitment and satisfaction.
While they navigate this hybrid model, employers will be looking for support from space providers that have the flexibility to meet their needs today and in the future.
Download the ‘Shaping Human Experience research from JLL here.
Boom in US Office Space Demand
An article in Globe St this month showed significant improvement in US demand for office space. The national VTS Office Demand Index (VODI), which tracks in-person and virtual tenant tours of office properties, showed strong increases in January and February and is now 38% lower than it was just before the pandemic – a significant improvement on the position in May 2020 when it was 85% down on pre-pandemic levels.
It was also encouraging that February also saw the first month since October 2020 where demand increased in all office markets tracked by VODI, with New York City, Seattle and Washington D.C. leading the growth.
The Resilience of Commercial Real Estate During the Global Pandemic
Nuveen recently published a report on the experiences of commercial real estate during the global pandemic and offered their near to medium-term outlook for the industry.
When it comes to impacts on the office sector, Nuveen comment how the trend of densification had taken hold pre-pandemic. Figures show that in recent years average space allocated per employee had shrank from 250-300 sq ft to as low as 100-120 sq ft. Nuveen suspect, therefore, that this trend will come to an end and that many companies (during the process of planning how to adapt their work environment) will allow for more space per worker in the future. They believe this will mitigate any decrease in demand for office space brought about by work-from-home arrangements.
Flexible Real Estate: Demand Will Grow and Tech Will Be King in 2021
An article this month in Globe Street cited recent research from Colliers that suggests “2021 will be the year that non-CBD flexible workspace supply increases dramatically”.
This sharp increase in demand is expected to come from occupiers who are seeking to offer a range of geographic locations for their distributed workforce. Increased supply is predicted to come from both existing operators as well as new entrants to the market which could include repositioned retail and hotel assets.
It’s also noted that “tech will be king” in 2021 as occupiers need to execute on what they call “occupancy strategies”. As a consequence, Colliers expect partnerships between landlords and providers to increase as the year goes on.
We kicked off February by hosting a virtual roundtable as part of SPACE UK; the event focusses on exploring big ideas and new business models for the commercial industry. Our table discussed why landlords are adopting more of a service provider mindset when it comes to managing their assets and what this means in practice.
Our CEO, Mark Furness, hosted the roundtable and participants included thought leaders from Great Portland Estates, Tishman Speyer, M7 Real Estate, LandSec, The Collective, Runway East and British Land.
You can view the roundtable recording and hear what our industry participants had to say here.
January 2021 by Amanda Fanoun
The Future of the Office
With 2020 in the rear-view mirror, there’s reason to be optimistic about the year to come. A vaccine roll out is underway, surely to bring a boost of morale to communities around the world, and an uptick in workers trickling back to their offices. While the return to a full five-day week in the office is unlikely in 2021, the silver lining of the global coronavirus pandemic has been the market opportunity left in its wake.
Instant Offices predicts a 21% growth in flex-space office supply globally. Where will this growth come from? The shift towards flexible office models has accelerated, causing landlords to look more thoughtfully at rolling out flexible propositions. Meanwhile, pure play flexible workspace operators are well positioned to grow and meet market demand. Of course, this will depend on how well they’ve planned for the rainy day.
For both market players, the writing is on the wall. There is the need and the enthusiasm to drive the workplace experience into its next phase of evolution. Flexible is the future of the office and occupiers are at its core. Those who are positioned to clear complex operational hurdles and adapt to tenants’ evolving requirements will undoubtedly see the light at the end of the tunnel.
Worker Choice is Key
Real estate guru, Dror Poleg, shared his insight on the office market in a recent New York Times article. The office will become “more dynamic than ever”, he writes. The expected change is being driven both by where people choose to work and the consumerisation of the office. Poleg emphasises the importance for space providers to adjust to the new era of worker choice.
In a recent CBRE occupier survey, 86% of respondents consider flexible office space as a key component of their real estate strategy and portfolio plan up from 73% less than a yea ago. The latest North America flex office report identifies the case for optimism within the market as 2021 gets underway.
Perseverance and adaptation are essential during the continued pandemic. Key indicators for resiliency will be a space provider’s ability to deliver on new office requirements and evolve existing business models to meet demand.
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