The Rise Of The Flexible Workspace Industry
Most businesses run digitally by default in the 21st century, enabling employees to work remotely with ease. In practical terms, that means workers can be just as productive at home or in a local flexible workspace as they are in a traditional office.
This widespread ability to work from anywhere has resulted in the number of people working from home in the UK doubling in just 10 years, and 2020 has seen the greatest rise in adoption of home working yet, due to the effects of the coronavirus pandemic. But the dominance of digital platforms doesn’t just accommodate home working. It’s also facilitating the rise of the flexible workspace.
It was estimated in 2019 that around 4% of offices were flexspaces, and the rapid increase in the prominence of flexible workspaces has prompted predictions about just how large the niche can get. JLL estimate that, by 2030, 30% of corporate real estate portfolios will be made up of flexible or coworking spaces, while Instant Offices have predicted that 35% of offices will be flexible in some way by 2023.
Given the current COVID-19-influenced circumstances, however, the rate of change in the way we work has sped up. Years’ worth of progress has been made in just three months, as the nation moved home to work, and it’s looking more likely that a third of all workspaces will be flexible by as early as next year.
What is a flexible workspace?
A flexible workspace is a fully equipped office that provides businesses with a space to work in without the need for their own equipment or expenditure on set-up costs. Flexible workspaces usually have all the features of a regular office and will be serviced by the operator, meaning occupiers are free to focus on their work.
Choosing a flexible workspace cuts out significant costs, including securing a lease on an individual office, buying equipment, and managing the space. That allows businesses who settle in a flexible workspace to move straight to the important part of running a business – doing the work. Start ups that are trying to run as lean a business as possible can see particular benefits from this model.
Flexible workspaces also allow for large corporate businesses to decentralise their workforce, enabling their employees to work closer to home and cut out their commute while still gaining the benefits of being in an office environment.
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Types of flexible workspace
Within the umbrella term, ‘flexible workspace’, there are several more specific examples of types of workspaces that businesses can choose over a traditional private office.
A serviced office is the closest thing to a traditional office out of the types of flexible workspace that are available. Businesses can rent out individual enclosed offices or suites in a serviced office building, paying on a cost-per-desk basis rather than a flat rate. The space will be fully equipped and ready to work in, and all maintenance, cleaning, and management will be handled by the operator.
A coworking space is a more modern approach, providing an open and shared environment in which individuals from different companies work side-by-side. The cost of choosing a coworking space is usually in the form of a monthly membership fee which will include use of equipment, office features, and other facilities.
Hybrid office spaces
A hybrid office space combines parts of both serviced offices and coworking spaces. Hybrid operators offer shared room for coworking customers as well as private offices for businesses to rent, while office facilities will usually be communal. As with all types of flexible workspace, maintenance and management of the space are left to the operator.
What’s driving demand in the flexible workspace industry?
According to research from Instant Offices, there were more than 31,000 flexible office spaces available worldwide in 2018, with an annual growth rate in the industry of 35%. This fast growth is being propelled forward by radical changes in what businesses need from offices, and it’s showing few signs of slowing.
There are a huge number of reasons that more businesses are choosing flexible workspaces over traditional offices, but these are some of the main ones.
Work near home solutions
Work near home is a solution that sits somewhere between compulsory office attendance and working from home. It’s based around the idea that employees can gain all the benefits of working from home while retaining the positives of working in an office space by using a flexible workspace near them.
It’s a solution that’s gaining traction with large corporate businesses who are keen to ensure high levels of productivity from their employees but want to address the growing demand for flexible working arrangements. If adoption continues to grow, large companies choosing to opt for work near home solutions will provide a huge influx of customers to flexible workspaces on high streets across the country.
Simplicity and cost
For SMEs, and particularly businesses with fewer than 100 employees, traditional office leases don’t make much sense. They require a lot of effort to secure and come with overheads that aren’t actually necessary and can be damaging to cash flow.
Leasing an office in the traditional sense involves hiring a lawyer to understand the documents, fitting-out the space with professional help, recruiting an IT company to set up equipment, buying all of the amenities to make employees happy, staying on top of maintenance, and hiring cleaners. All of these responsibilities are a distraction from actually doing business, and they’re all eliminated by flexible workspaces.
Increasing number of startups
Since they first appeared, flexible workspaces have been particularly attractive to startups. While larger corporate businesses might use flexible workspaces as interim offices while looking for a new permanent home, startups have been working diligently in flexible spaces with excellent productivity for years.
The rate of startup businesses appearing is at an all-time high in the UK and with the growth in the startup sector comes growth in the demand for low-cost, low-commitment workspaces that can be used flexibly. Coworking spaces and hybrid offices in particular also provide startup businesses with the perfect environment to network and grow alongside other fledgling businesses.
The number of freelance workers in the country is also growing, with a 31% rise in the self-employed sector between 2018 and 2019. Just like with startups, the more freelancers there are, the more demand for flexible workspaces there seems to be.
Flexible office spaces are attractive to freelancers for many of the same reasons they’re desirable to startups, including the low initial costs, flexibility in terms of occupancy, and networking opportunities on offer. As the number of freelancers continues to grow, as it’s expected to over the coming years, flexible workspaces could be poised to house as many as three million self-employed workers.
The future of flexible workspaces
The same report from Instant Offices that highlighted the industry’s 35% year-on-year growth rate also predicted that, by 2023, 35% of global office space will be flexible. The market has a long way to go until that point.
Currently, the market is made up of only two or three global operators (WeWork, IWG, and Servcorp), with the rest of the flexible workspace operators being smaller, mostly national businesses, typically with <50 locations. A large number of them are struggling – despite the demand for flexible workspaces continuing to grow – due to a number of operational errors. The most serious of their mistakes is that they’re not focused enough on staying relevant.
Relevancy in the office market is, far and away, the most important thing to get right. In fact, the reason that flexible workspaces are growing in popularity in the first place is that traditional office operators failed to stay relevant as customer needs changed.
The function of the office has changed from being something that was purely an expensive means to an end (having a place to work) into something that can itself drive value. From enabling employers to be able to hire the best talent no matter where they are to providing employees with spaces that work better for them, flexible workspaces are the future of the workplace.
However, the remarkable pace of change that’s visible in the commercial office property market is unlikely to slow any time soon, so retaining relevance and continuing to prosper in this dynamic industry requires a fundamental reassessment of the flexible space.
As people seek a new life, driven by new ways of working, customer experience is going to be the new battleground where customers are worn or lost.
Spaces to Places offers commercial office consultancy services that can put you ahead of the competition, continually uncover disruptions in the office market, and drive revenue through occupier attraction.