UK demand for office space from coworking providers is projected to increase significantly over the next decade, driven by growth in self employment, micro businesses and the demand for flexible working.
As an organisation representing occupiers, CoreNet Global’s UK chapter is seeing this trend prompt changes to traditional working styles in larger corporate organisations.
This will impact upon the type and location of buildings required in the future and there is an opportunity here for landlords and investors to benefit financially from this trend while also serving the evolving occupier market.
The demand for coworking space cannot be ignored. DTZ’s recent report The Coworking Revolution shows how coworking has moved from niche market to a fully-fledged alternative to the traditional office, thanks to: technology; the growth of online, technology and creative industries; generational change; and an increase in micro businesses and independent workers.
Simply put, coworking is when two or more people work in the same space, but not for the same company. Centred on a core set of values — community, openness, collaboration and accessibility — it provides for workers who want to work where, when and how they want by offering flexible infrastructure on a membership basis.
With self employment forecast to increase 15% over the next decade and micro businesses now representing 96% of all UK business, with a further 1.1 million new micro businesses predicted by 2024, demand for flexible working environments is set to soar.
Often located in fringe areas, popular with the creative, technology and digital sectors, the model is financially accessible to smaller tenants and offers a narrower pricing gap between submarkets than conventional offices. For example, the difference between coworking spaces in the City and West End is just £63 per member per month.
In Europe, coworking is a concept that emerged in large creative cities such as Berlin, Paris and Budapest. It is now spreading rapidly across the continent and is influencing working environments across companies of all sizes, as competition for skills increases and large corporations seek to attract and retain young talent.
Across the US and Europe, younger generations want to work in a highly connected environment close to services and entertainment. 74% of millennials want flexible working schedules and as many as 88% favour the kind of collaborative culture offered by flexible working environments.
On average, coworking spaces dedicate 10%-20% of floor space to areas where employees can socialise and work collaboratively. This model sees collaboration as a key driver of growth and big businesses are following suit.
We have already seen major corporate occupiers adopting smarter, more agile working practices and introducing activity-based workplace design. Bank of America Merrill Lynch, Macquarie Group and Deutsche Bank are just a few examples. In the case of Macquarie, activity-based working environments have eliminated ‘churn’ (the cost of moving groups and redefining spaces) and maximised space utilisation.
Some are also looking to coworking spaces as a satellite office to accommodate a particular style of working or to provide a base out of town or in a highly desired location. Landlords are jumping on the bandwagon and opening ‘third place’ business hubs.
So as the traditional working styles of larger corporate organisations change to meet the evolving requirements of today’s workforce, there will be an impact on location and workplace design. Occupiers will have new expectations and investors and landlords will need to tailor their portfolios accordingly. A location that works for coworking today is likely to be a great location for more ‘traditional’ offices two years from now.
James Maddock is president of CoreNet Global’s UK chapter and and head of the EMEA global corporate services team at DTZ.