Market Digest

Flexible workspace is facilitating evolving real estate portfolios

Instant Offices’ US report highlights how flexible workspace is facilitating new real estate strategies. Business relocation and hybrid working are driving up demand for this asset class.

Instant cites a 58% increase in demand for flex across the US. Since the pandemic new business hubs are emerging in the US outside of the standard hotspot cities. Miami, Tampa and Houston are among these emerging business hubs, which are even outpacing traditional commercial hotspots like New York and San Francisco.

Flexible workspace is an enabler for companies to be creative with their real estate strategies. Instant predicts that flex supply will diversify to stay aligned with changing occupier requirements beyond just the space component, but wellness sustainability and experience as well.

Top quality space seen as way to encourage office return

Savills published the latest issue of its Prime Office Costs insight. The commentary on the office market is underpinned by quarterly analysis on occupancy costs but elaborates on what this could mean for the office market more widely.

Savills believes that many occupiers, for the first time, are now undertaking analysis of how their employees will use space post-Covid19. They state that “top quality spaces in prime central business districts… are fundamental to encouraging staff to return to the office and attract new talent”.

The Savills Prime Office Costs Index presents a quarterly snapshot of occupancy costs for prime office space throughout the world.

Harnessing growth, navigating uncertainty: The recovery of APAC'S economy and commercial real estate outlook in 2022

The 2022 Market Outlook by CBRE Research Asia Pacific is filled with optimism on the recovery of the real estate sector in the region. The report highlights renewed interest in office assets for investors. It states that companies in APAC are utilising workplace redesign to attract and retain talent during this time of the “Great Resignation”. CBRE also predicts that the focus on sustainability and ESG will remain a huge focus for companies in the region as more countries pledge to carbon neutrality between 2030 and 2060. Both occupiers and landlords will be under increasing pressure to comply with sustainability standards and reporting.

“Overall, the outlook is bright for the Asia Pacific real estate market in 2022, with significant growth opportunities across sectors.”

– Henry Chin, Ph.D, Head of Research, Asia Pacific

Making hybrid work work: Microsoft’s deep dive into new working dynamics

According to Microsoft we have now reached an inflection point in the lived experience of hybrid work in their latest research: Great Expectations: Making Hybrid Work Work. The report makes it clear how much employees value flexibility and wellbeing, and that these new expectations create an opportunity for organizations to reimagine work-life integration as a win-win.

Our current working climate leaves all parties with one question: what is the role of the office? Business leaders ponder, how do teams build social capital in a digital-first world? The report states that 43% of leaders believe relationship-building is the greatest challenge in remote/hybrid environments, and another 43% of remote employees say they do not feel included in meetings.

“You must design workplaces with enough flexibility to support every employee. A mix of quiet places, collaboration areas, and touch-down locations helps ensure everyone can be connected, engaged, and productive.”

– Michael Ford, CVP of Global Workplace Services, Microsoft

Microsoft’s 2022 Work Trend Index report outlines findings from a study of 31,000 people in 31 countries, along with an analysis of trillions of productivity signals in Microsoft 365 and labour trends on LinkedIn.

Offices need to be more than a four-walled business

EY were asked by Property EU to review the hot topics impacting the real estate sector at a global level. EY commented the office is no longer seen as a fixed asset, but an overall workplace experience. EY also reference studies that show only a minority of companies have taken official steps towards planning the future of work. They say the ‘wait-and-see’ attitude needs to be overcome and that trends towards digital transformation have accelerated.

The office of the future needs to consider “technology, workplace design, sustainability and the overall employee experience. We need to upgrade technology and must consider the shift in employee needs”.

International Women’s Day: Why property is the place to be

A recent edition of the Recast podcast from Remit consulting, UK based real estate consultancy, focuses on women in real estate to mark International Women’s Day. Female leaders from Nuveen, BNP Paribas and Remit consulting share interesting views on what they love about working in property and some of the key trends impacting the industry. A focus on people and occupier experience is the future, and ESG and sustainability initiatives are key for successful real estate strategies.

Technology analysts address workspace transformation

The recently published InfoBrief released by global market intelligence firm, IDC, outlines a framework and building blocks to achieve a best-in-class workspace. With market trends in flux and the drive to hybrid working picking up speed, occupiers and workspace providers alike are under pressure to deliver space that aligns to the needs of today’s workforce.

Based on in-depth interviews with leading global workspace providers such as Industrious, Tishman Speyer and Hines, technology analysts identify five key components and six building blocks to consider in alignment when mapping the journey to workspace transformation.

A holistic and integrated approach to technology is clearly identified as critical to delivering best-in-class workspace solutions.

IDC analysts also reveal a technology maturity model that describes the stages of workplace technology adoption. Its purpose is to help organisations identify gaps and opportunities in their technology strategies. The better alignment between the framework and the building blocks, the higher up the maturity model.

Emerging real estate trends in Asia Pacific in a post pandemic world

A joint report between PwC and the Urban Land Institute sheds light on the profound changes in ways people use real estate in the post-pandemic world. Commercial real estate is no longer regarded as a plain-vanilla investment held over time. With occupiers demanding more, landlords are becoming more proactive in redefining the office space and the trend of flexible working continues to top the occupier’s agenda.

Outlook bright: CBRE highlights drivers of flex for 2022

Despite 8.7% contraction of flexible office supply, CBRE’s flex focused report puts an optimistic lens on the recovery of the North America flexible office market. They reference growing demand pipeline from enterprise tenants, a rebound in sales and occupancy among flex providers, and shifting real estate strategies aligning to emerging space usage patterns.

This insightful report draws on occupier sentiments and trends for using flexible office space, outlining maturity models, emerging strategies, and specific use cases. In line with shifting market dynamics, office providers are also taking new approaches to the business model. From growing owner-operator models and partnership agreements to increasing on-demand and subscription-based offerings, the report highlights the growing trend for a larger network of flexible spaces.

While the outlook is bright, CBRE details challenges the industry will face including meeting enterprise privacy requirements and slow adoption of critical technology to support growth and premium user experiences.

Flexible space is critical to the future of the office

Cushman and Wakefield’s recent report delves into the flexible office sector from multiple angles – landlords, occupiers and operators. They focus on how this asset class has fared since the on-set of the pandemic through to current changing dynamics between stakeholders.

The obstacles created by the pandemic created an urgency for adjustment – from right-sizing inventory to re-inventing product strategies that align to a fast-evolving market. Operators have begun focusing on enterprise products and pay-as-you-go models while landlords are stepping fully into flex to mitigate risk. Despite hurdles, flexible office demand for flex has grown and the report suggests that flex is core to the long-term future of workplace ecosystems.

Flexible office pushes to mainstream in Singapore

Instant Offices released the latest research on the Singapore market and the trend is clear: flexible workspace is key to driving agility and delivering hybrid working models. Demand for flex is up 3% compared to the previous six months, term length has increased 33% and the average transaction size is up 32%.

In line with growing demand, supply in the region grew 6% from 2020 to 2021. Despite the continued impact of the pandemic, the drive to flex is attributed to corporate occupiers shifting to flexible space through enterprise solutions and a 14% increase in flex space uptake by tech companies.

Flex: A key component of a CRE strategy

Colliers’ recent report on flexible workspace highlights the top trends for 2022 in the sector. Among them, evolving flex delivery models, ESG and flight to quality. It’s no doubt, flexible workspace has emerged triumphant from the pandemic. For years, flexible operators have been well-positioned to deliver dynamic workspace solutions to occupiers. With the influx of hybrid and distributed working models, Colliers highlights the continued strength of the sector and its products in supporting today’s occupiers with responsive workspace solutions.

Planning for the future of the office

Gensler’s US Workplace Survey Winter 2021 captured perspectives from over 2000 respondents about the return to the office. Recent COVID-19 variant surges have thwarted return to office plans, but Gensler’s research shows that companies are still planning how to get their employees back in the office. Their research highlights that the office is a prime location for employees to collaborate with peers and be more efficient in independent work. However, they value private spaces more than ever with almost 75% of respondents reporting they’d feel more comfortable returning to the office if they had access to more private space. For space providers, this strengthens the argument for making space and services easily adaptable and accessible.

Gensler suggests this is an optimal time to experiment with new real estate strategies that support new and distributed new ways of working. The office remains a critical component of any business. According to Gensler, the benefits it offers – the best tools, spaces and experiences – cannot be replicated remotely.

US office market looking up

The end of 2021 shaped up to be positive for the US office market. In spite of the on-going pandemic, leasing activity rose by 9.2% in the 4th quarter, bringing it 14.6% above 2020 rates. JLL’s Q4 report highlights leading activity in southern markets such as Atlanta, Austin, Dallas and Miami, noting however, that larger cities continued to lag.

Leases for large commercial assets over 100,000 sq. ft grew by almost 50% and represented 44% of total activity. Deals longer than 10 years also rose for four consecutive quarters to approximately eight years on average. The report notes the exceptional performance of new buildings delivered since 2015, a strong indicator that occupiers value the quality of newly constructed offices.

Experience at the heart of the office

CBRE makes a bold prediction that office-based employment will return to pre-pandemic levels. They note, however, that the type of space occupiers want and how they use it will be far from “normal”. Sustainability goals are highlighted as a top factor for occupiers in choosing an office, and CBRE suggests this could drive demand for newer more efficient buildings. This flight to quality singles out better performing buildings as compelling environments for occupiers and their employees.

Referencing popular uptake of hybrid working, CBRE highlights the importance of smart building and technology infrastructure to support accurate and real time data on occupancy trends. Employers are putting occupier experience at the core of their office strategies to attract employees back. They point to expanded technology infrastructure and employee expectations as drivers of consumerisation of the office experience.