While WeWork has triggered much speculation on the future of co-working, the consensus is that the shift in the way people work won’t be reversed.
As Dror Poleg highlights in his new book Rethinking Real Estate, customers are “becoming increasingly sophisticated, demanding and fickle”. Flexible working is here to stay but providers will need to differentiate themselves and be customer-centric.
In recent months, my Propertyshe podcast interviews have included Mark Dixon, founder and chief executive of Regus, and Charlie Green, co-founder and chief executive of The Office Group (TOG), who have provided telling insights into the future of flexible working.
Dixon started serviced offices company Regus (now IWG) 30 years ago. It now has 2.5 million members in 3,300 locations in 110 countries. Dixon spotted a “really big gap in the market” around the “rentalisation of the whole product”. Dixon was prescient but readily admitted: “I didn’t envision at the time you’d do it all on your mobile phone.” He saw the property industry as “not very efficient, not very customer-focused”.
He sees flexible workspace having reached a tipping point with global demand set to explode. Currently in small single digits, “it will go to probably 30%”, he said. “The customer just doesn’t want to be involved in the real estate industry and dealing with 15 different suppliers.”
TOG, now owned by Blackstone, was founded by Green and Olly Olsen in 2003. With more than 50 buildings in the UK and Germany and 18,000-plus members, TOG’s repurposed office buildings have a strong design and brand focus. In his interview, Green nailed it in terms of customer service: “If you’re providing office space and not delivering on the needs and wants of the occupier then you will not be able to fill your buildings. Space as a service is such an important message for owners to understand.”
He referenced the technology-enabled shift in power from landlord to occupier, who is now better informed with a greater choice.
Green said: “If you own an office building you have to engage with your occupiers. You have to have a relationship, and can no longer hide behind a managing agent or broker.”
Landlords have to understand that occupiers need a level of flexibility. Larger corporates may still take longer terms but will be more efficient in the use of space, taking less core space and bolting on a stretch element, dipping into flex and co-working. So it becomes an interesting, much more fluid offer available to every occupier, he said. Green recognises every office owner will address these issues differently. “Some will create their own brand and British Land obviously has Storey and Landsec has launched Myo, and that’s a response to the market.”
Green added that TOG will still buy freeholds and take leases but “mixing the portfolio and having an element of managed partnership agreements that are akin to hotel agreements would be a really sensible platform for growth”.
He expected brokers to also have an offering that gave them exposure to the flexible market. CBRE has its own co-working brand Hana. Knight Frank has recently announced a partnership with Work.Life to offer an operating platform for landlords looking to provide a managed solution with the benefits of co-working but with their own front door.
So, expect collaborative flexible workspace models to continue to emerge and further differentiation among the many operators. There will be something for everybody.
Susan Freeman is partner at Mishcon de Reya and is in the Work.Life advisory group