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RISE OF THE FLEXIBLE OFFICE

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Image credit: Getty Images

8 January 2018 | Herpreet Kaur Grewal

newsdesk@fm-world.co.uk


The shift in office occupier behaviour is paving the way for a ‘flexible revolution’.


The rise of the flexible office is the result of dramatic changes in the way corporate occupiers approach their real estate decisions, and will open up opportunities for landlords able to adapt and respond to these shifts, states a report from real estate adviser CBRE.


The Flexible Revolution, a pan-European study, states that over the past decade the global flexible office market has been growing at an average of 13 per cent a year.


Growth rates in EMEA (excluding UK) and APAC have averaged around 20 per cent a year, while the more mature and larger markets of the UK and the US have seen average growth of 10 per cent a year over the same period. 


Key European cities like Berlin, Paris and London have all seen strong year-on-year growth of 12-21 per cent between 2016 and 2017, which is comparable with markets like New York and San Francisco, where the flexible office idea has existed for longer.


London leads trend

The main reasons for growth have been technology – such as on-demand apps – economic trends such as rising levels of self-employment – and, behavioural changes such as a greater focus on flexible working styles, portfolio agility and the need for quicker go-to-market strategies.  


In combination with business disruption more generally, these are producing changes in corporate occupiers’ approach to real estate decision-making, leading to a growing need for flexibility within portfolios.


London is the largest market by far, not just in Europe but also globally, with more than 1,000 serviced and co-working centres. The reasons for its pre-eminence include the length and relative inflexibility of UK leases, for which flexible offices may provide a solution for occupiers.


The central London market has seen a diversification in the type of occupiers taking space, including a notable uptick in the amount of space leased to flexible space operators. 


Demand for flexible space has been fuelled by an increase in the number of small businesses in the UK since the recession (22 per cent) and heightened political and economic uncertainty. Recent strong levels of take-up by flexible space operators show no signs of slowing. Demand remains robust with some operators reporting close to 100 per cent occupancy of some centres.


Gavin Morgan, head of investor leasing, EMEA, CBRE said: “Investors who can successfully adapt their product will be at a distinct advantage when meeting the changing needs of the European occupier community.”


Stewart Smith, managing director, central London A&T, occupier, said: “The rapid growth of the flexible sector can be attributed to fundamental shifts in technology and economy, which has changed how occupiers behave. Each of these in some way is contributing to a structural change in how businesses approach their real estate decisions. The flexible office is here to stay because it addresses the basic occupier need.”


The report concludes that the building of the future is likely to move away from the traditional model of all floors being let on conventional lease terms. New developments will incorporate a flexible space element from inception with new buildings marketed as having floors dedicated for this purpose, along with wellness and other shared amenities.