5 Things That Greatly Impacted The Workspace-as-a-Service Industry in 2016

Published on December 8, 2016 - By Cecilia Amador de San José

This year has been one for the books, for the world at large and for the flexible workspace industry. Brexit, the US elections, Castro’s passing, the Olympics, ‘post-truth’, the Panama Papers, Queen Elizabeth turned 90, Solar Impulse 2, Dilma Rousseff’s impeachment… this list could go on and on, but you get the idea.

As 2016 comes to an end, we’re looking back at global and industry-specific occurrences that have either challenged workspace-as-a-service or helped it grow, evolve, and conquer this year.

1. Brexit

June 23, 2016 the UK voted to leave the European Union. The results came as a shock to many, with various business owners worrying about what exactly the vote meant for their business. For some companies, the vote meant that they would need to shed workforce, close operations in the UK, or move abroad. It also meant many would likely see a delay in investment, and others would refrain from committing themselves to new leases.

The Brexit vote created uncertainty, and for the flexible workspace market this uncertainty was transformed into increased opportunity. As companies settle on their next business move, they will look at flexible workspace options to keep their operations running. Landlords are also expected to turn to flexible workspace providers to sign flexible and short leases to decrease the possibility of vacancies.

Brexit meant opportunity for workspace operators in the UK, but it also meant opportunity for operators in other regions as well. As companies move their headquarters from the UK to other countries, flexible workspace operators will see an increase in demand for their services, especially as businesses first set up in a new city and market.

To read more about how Brexit impacted the industry this year, click here.

2. The Rise of Corporate Coworking

Millennials are now the largest generation in the workforce and they have disrupted the traditional work model that used to rule companies before. It’s not only their doing–technology and other tools have also contributed to new ways of working–but millennials demanding flexible work options, many of them starting their own businesses, and their constant connectivity has led companies across sectors and regions to change the way they attract and retain talent.

One of the ways companies are reaching out to this and younger generations is through improved workplace environments. Microsoft, Google, Amazon, Airbnb, HSBC, Bayer— there’s an endless list of established companies that are adopting coworking, either by allowing their employees to work from a coworking space or by implementing the coworking model design within their headquarters and office buildings.

According to JLL, coworking has become integral to the corporate real estate toolkit, and the trend will only continue to grow in the coming months and years.

To read more about how corporate coworking has grown this year, click here.

3. Rising Cost of Real Estate

To put it in JLL’s words: “​We’re in a new era of city competition, where cities are battling it out to attract talent, corporations and capital. Perhaps nowhere else is this intense and escalating competition better illustrated than in the demand for the world’s most prestigious office buildings and districts.”

Increased demand of office buildings and work space ultimately leads to a rise in the cost of real estate. We’re seeing this mostly in major markets, like London, Hong Kong, New York, Beijing, Tokyo, Shanghai, Boston, Los Angeles, and Sydney. As the demand for prestigious and premium locations grows, landlords will continue to seek higher-quality covenants from their tenants, which could put a squeeze on many of the smaller independent operators and potentially slow the growth of some of the largest operators in our industry.

To better understand the rising cost of office real estate and the effects this has on leases, landlords, and demand, we suggest you read JLL’s full report on Global Premium Office Rent Tracker.

4. Niche Specific Workspaces

As the workspace-as-a-service industry grows, operators need to find ways to differentiate themselves and offer a unique value proposition. Various workspace operators have found that their path to success is paved by a specific industry market niche.

Niche workspaces fully cater to specific market needs and they’re a great way for operators to truly attract their target member base. This  year, we’ve come across workspaces that cater exclusively to women, to men, to musicians, to chefs, to freelancers, and to startups.

As the industry continues to grow and expand its footprint across new markets, we expect to see more workspace operators focusing only on specific niche markets as a way to attract clients from new and highly-specialized sectors.

5. Emergence of Larger Brands

The flexible workspace industry has seen incredible growth due to the increased number of new workspace operators that appear on a regular basis. However, the industry has reached a point where not only do new operators come along, but established ones begin to grow and expand their footprint on a local and/or international scale.

Among the larger brands that have emerged this year, we have Serendipity Labs, Industrious, Premier Business Centers, Office Evolution, Spacemob, Urban Station, Tribes, and Alliance Business Centers.

The emergence of large brands points us in the direction of trends that will impact our industry in 2017. As larger brands continue to plan their growth strategy across multiple markets and regions we will see an increase in consolidation, as operators will look into acquiring established workspaces or franchise options in order to power-drive their growth.