For decades, occupiers have had limited options for how to acquire offices. It was either take a conventional lease or choose from a limited variation of serviced office options.
The conventional route had been forever based on landlords granting tenants leases to occupy space on traditional, often outmoded terms, typically with limited after-sales service.
But a combination of factors, driven by changes in life and work, including the meteoric rise of co-working brands, and accelerated by the pandemic, have created a fundamental change in the range of options now available for occupiers to occupy offices. This is driving a revolution in the availability of different office ‘products’ that occupiers can now choose from, to ‘consume’ their offices in the way they would like to, based on the needs of their business.
There are an ever-increasing number of agile office product operators, offering an enormous range of workspace options, from large, international providers to a growing number of regional providers, to dozens of national and city-based providers. Each offer their own office ‘products’, with specific brands and value propositions for their version of an office – from ‘luxury workplaces’ and co-working spaces to those focusing on specific sectors or values, such as sustainability and social impact.
Some are aimed at large corporate enterprises, others at mid-cap SMEs and some squarely at start-ups. These products offer different ranges of services, amenities, communities and terms, to provide real choice for the office consumer.
The range of services and amenities now offered with these products are often a key element of their differentiation. At a time when workplace user experience is critical for occupiers, services focused on wellness, such as sit/stand desks, through to wellness-orientated features such as yoga, outdoor space and on-site fitness centres, are becoming a more common element of the product.
Another part of the value proposition is the community element these options include as differentiators. Some providers offer a global community, connecting users to all manner of service providers all around the world.
Others have tapped into more niche markets; a case in point is a co-working hub designed for psychology practitioners. A sense of community in the co-working spaces is often fostered by events, communal lunches and other networking activities.
However, perhaps the most fundamental differences offered by these products compared with the conventional lease are the multiple occupancy options available, from basic options for different length of tenure – daily, weekly or monthly – to size options ranging from desks, rooms and suites to whole floors.
The market is awash with options offering licences, passes and memberships, often branded. Increasingly, rather than be tied to a particular space, providers offer multiple touchdown locations anywhere in the world. Major providers offer different enterprise plans, enabling corporates to move their teams around a network of global flex space on an ‘on-demand’ basis, paid via a single monthly bill.
From the time when serviced offices were aimed mainly at SMEs and start-ups, we are now seeing multinationals embracing the ‘agile office’ revolution in new ways, starting to create a mix of products in their portfolio that offers the employees different experiences, and the company an agility in what was previously a fixed cost.
Our latest EMEA Occupier Survey revealed that when asked about the percentage of flex space making up the company portfolio, businesses with between 11% and 50% of their portfolio in flex space expected that percentage to double over the next two years. Almost 20% of the 130 major occupiers surveyed said they expected agile space to account for the majority of their portfolio in the next two years!
The banking industry has been no stranger to adopting agile space, often looking to diversify the work environment by suiting space to needs – for instance, having a more collaborative and dynamic vibe for people working in tech functions.
As hybrid working becomes the norm, other companies have signed agreements with flex providers to allow staff to work from ‘near-home’ locations rather than commuting into cities. Another proposition that has piqued the interest of large corporates is an aggregator model, where a single pass buys access to flex space from multiple providers and locations, opening up a wealth of options and functionality.
This changing world of office consumption means providers of space have to think differently about their product – and the space, service, amenity, community and terms that it is offered with. Large landlords have already developed their own agile products, but in the next few years, I expect more landlords to offer agile solutions and move into different types of space. For advisers, this is now a specialist area, requiring a comprehensive understanding of all the products available and how to construct a bespoke structure.
The pandemic has exacerbated a shift in the workplace and landlords have to adapt and work more closely than ever with occupiers to meet the changing needs in how real estate is consumed.
Guy Holden is managing director of advisory and transaction services, EMEA, at CBRE