Coworking defines a way of work that enables self-employed and other professionals to share the work space with other creators from their own or related industries occasionally or permanently, and in addition to space, the term also refers to the community that is created within it. This reduces the cost of renting space, and at the same time, through spontaneous networking with other individuals of various profiles, they gain new experiences, ideas, enter new projects and create innovations.
Central London has one of the largest and most mature markets for flexible jobs worldwide and has consolidated its global position over the past five years.
The reasons for growth in the sector are well documented. These interconnected trends have inspired this sector to develop in order to meet the changing needs of their customer base and to take new opportunities.
The shift to self-employment post Global Financial Crisis now seems to be a permanent feature of the UK economy rather than just a necessary reaction to economic crisis. Self-employment has reportedly grown by a quarter since 2009 to nearly five million people, and the freelance sector, who tend to be knowledge-based workers, is one of the fastest growing sub-sectors up by more than a third since 2008. This section of self-employment, estimated at 1.91 million people in the UK, is likely to be the primary source of demand for flexible workplace.
Technology has enabled change, especially the exponential growth in the smart phone over the last 10 years, and has been a key factor in the rate of business growth and offers a great opportunity for the self-employed.
Flexible workplace operators anticipate demand from larger occupiers to accelerate in the future. This helps the operator de-risk the weaker covenants of young companies by supplementing them with established firms with greater financial strength. The future success, or otherwise, of these managed solutions will depend upon the propensity of larger corporates to integrate flexible workplaces into the real estate strategy.
Flexible workplaces are used as a strategic tool where employees come together on a short- term basis, to inspire and innovate in an environment outside the usual corporate constraints. Expectations of work have evolved flexible spaces. For start-ups and SMEs, many who are initially faced with uncertain growth and cash flow expectations, flexibility is a key attraction: they can adjust themselves in flexible workplaces rather than signing up to a long-term lease.
Increasingly, flexible workplace providers are seeking to integrate vertically with other businesses and services in order to provide a wider range of benefits to their users.
The real estate industry is becoming less product-focused, and will instead provide access to features and services on demand. By leveraging their comparative size, flexible workplace operators can bundle their real estate products with other useful business services at a discount, due to economies of scale. This also benefits the occupiers, as small businesses are able to access high-cost services that were previously too expensive.
The growth of the sector has shaken up the real estate industry and has seen increasing numbers of landlords considering strategies to incorporate flexibility into their portfolios.
Without exception, the landlords surveyed all stated that flexible workplace operators represented a higher proportion of their property portfolio than five years ago and that they anticipated this to follow an upward trajectory in the near term at least. Nevertheless, exposure remains relatively low.
There are three possible strategies that landlords appear to be contemplating: partnering with a provider, buying an operator or setting up their own flexible operation. For many this means providing shorter, flexible leases rather than any major move into the sector, as landlords take the view that they do not have the scale nor the expertise to enter the sector directly. Operating flexible workplace is a margin-play, and requires specific skills to generate significant returns. Most operators we spoke to felt that this was outside the capabilities of a traditional landlord. Through direct partnering or their own offering, landlords will provide increased competition for established flexible workplace operators. The concern to some operators is that landlords are in a better position to expand, as they already own the real estate and have the scale, funding and flexibility to take a risk. This was identified as a major threat to operators’ growth in the future, behind increased competition from other operators, and a weaker economic environment. Those landlords not looking to enter the sector directly are taking the opportunity to consider how they can be more user friendly to their occupier base, whether through simpler lease documents or harnessing the latest technology to create a more engaging user experience across their portfolio.
Source of article: Cushman & Wakefield
Source of photo: Deskmag