Corporates are set to become the driving force within the flexible workspace industry as the way they view their office portfolios continues to change, according to research by Instant Offices.
The flexible workspace sector has ridden the crest of a wave for the past five years with global demand increasing by 50% and more market supply of flex space than ever before. Instant now estimates the global market to incorporate 32,000+ centres, which represents 521 m sq. ft. This is an increase of 15% year on year since 2013.
By the end of 2019, 40% of demand is expected to come from large and corporate companies, with the average tenant taking seven or more desks in flexible space.
Corporate organisations are looking for larger and more agile workspaces, which is symptomatic of a global move towards more flexible lease terms. The ‘Space as a Service’ model was responsible for some of the biggest flex deals of 2018 in New York and London, and included household brand names like Microsoft, Amex, IBM, GSK, Adidas, and Facebook. On the back of corporate tenant pressure, trends suggest that increasing numbers of landlords in the US and Asia will launch their own spaces or collaborate with providers. This has already been seen in the UK and Europe but is yet to take off in either of these markets.
Occupiers continue to reassess the way they use office space, and with both commercial real estate rates and the cost of living some of the highest on record, many companies are starting to look towards secondary cities to cut costs and increase affordability for employees. Forbes announced that the fastest growth markets in the US (gross metro product) in 2018 were Las Vegas, Orlando and Austin, all secondary markets, while in Europe, Manchester and Toulouse topped the UK and French markets thanks to increasing investment and a growing corporate focus.
In 2018, the sector showed significant market shifts with an increase in corporate clients looking for flex space. Demand from corporates increased by 21% in 2018 alone. Landlords are also taking a greater interest in the sector in the face of this increase in client demand.
All EMEA cities, including Manchester, Lille and Frankfurt, have seen supply grow by 15+% in response to accelerated demand. In the US states such as Kansas, Nebraska and Oklahoma all reported growth rates of over 20% across the last 12 months. Europe is forecast to see 255 million sq. ft. of flexible space in 2019 – a 12% increase with over 70% of this space being available in smaller secondary cities.
Despite growing demand, it is expected that this year, a short-term oversupply of all types of flexible office space, including co-working and hybrid space, will see 2019 rates contract in London. The same trend is likely to follow in New York and Hong Kong – the world’s largest flexible markets.
London rates are forecast to remain the highest in Europe at £644 in 2019, which alongside strong demand means suppliers continue to move into the market. It is expected that the flexible market will make up 7% of the London CRE market in 2019 on the back of continued investment and growth.
John Williams, Head of Marketing at The Instant Group commented,
“As the type of demand changes and the lifetime value of occupiers in flexible space increases, leading operators are expected to become more competitive and offer increasing discounts in key markets to gain share. Here at Instant, we forecast that in these competitive markets, operators will be willing to offer 20% or more off the advertised rates while they attempt to gain market share.”
About the Instant Group
Founded in 1999, The Instant Group is a workspace innovation company that rethinks workspace on behalf of its clients injecting flexibility, reducing cost and driving enterprise performance. Instant places more than 7,000 companies a year in flexible workspaces such as serviced, managed or co-working offices including Sky, Network Rail, Capita, Serco, Teleperformance, and Worldpay, making it the market leader in flexible workspace.
As a listings platform, Instant Offices hosts more than 12,000 flexible workspace centres across the world and is the only site of its kind to represent the global market, providing a service to FTSE 100, Fortune 500, and SME clients. With offices in London, Newcastle, Berlin, Haifa, Dallas, New York, Miami, San Francisco, Hong Kong, Sydney, Singapore, and Kuala Lumpur, The Instant Group employs 230 experts and has clients in more than 150 countries. It has recently been included in the 2018 Sunday Times’ HSBC International Track 200. For more information, visit www.theinstantgroup.com.