- Companies are leveraging CRE solutions to help them right-size and right-purpose their workspace.
- The way people work has fundamentally changed, which means that the workplace needs to evolve to keep up.
- New research from the Instant Group claims that flexible workspace can provide a solution to the challenges businesses are facing today.
The pandemic has increased appetite for flexible workspaces. This comes as companies seek to leverage CRE solutions that can help them right-size and right-purpose their offices to meet the changing needs and demands of the modern workforce.
The way people work has fundamentally changed, which means that the workplace needs to evolve to keep up.
According to the Instant Group’s latest report, ‘How the pandemic is increasing appetite for flex space across Australia’, it is “becoming apparent that the flexible workspace industry, which is agile by its very nature, can very quickly adapt to change and can provide a solution to many of the challenges businesses are facing today.”
This is why flexible workspace demand at the moment is coming, in large part, from large corporate clients. Companies that are quick to make a decision to leverage flexible workspace solutions have the unique opportunity to secure quality space at a reduced rate, according to the report.
Key Findings from the Report
- Across Australia, a record 18 percent of all inquiries for flex space in Q1 2021 were for 10+ workstations, whereas demand for 1-2 person offices dropped by 14 percentage points since Q1 2020.
- Global players are expanding: The top 10 operators in Australia increased their market share by 1 percent, to 22 percent, throughout 2020.
- Flex space transactions rose by an average of 100 percent across suburban locations from 2019 to 2020, compared to a drop of 39 percent in Melbourne central business district (CBD).
- Occupancy in the outskirts of Melbourne increased from 69 percent to 73 percent from Q2 2020 to Q2 2021, whereas it dropped from 77 percent to 66 percent in the CBD.
- In Australia there was a 33 percent increase in demand throughout 2019; this took a downward turn in all markets at the end of the first quarter of 2020. Now interest has recovered almost as quickly as it declined.
- Average transaction length increased by 29 percent, from 5.9 months to 7.6 months.
- Average transaction size increased by 55 percent, from 4.2 workstations to 6.5 workstations.
- Both supply and demand increased by 2 percent.
The Need for Flex, Why Now?
Flexibility, human-centric workplace design, and the war for talent are trends that were well underway before the pandemic hit. Since the pandemic, these trends have become a key concern for businesses across the globe as they seek to engage employees and drive greater workplace efficiencies in the face of change.
As a result, real estate, IT, and HR teams are now tasked with the challenge of working together to create a seamless employee experience for remote and in-office workers. In the process of creating this new employee experience, many leaders have come to realize that their current offices are no longer fit for purpose, and, as a result, they are in search of new workplace models.
Flexible workspaces are increasingly becoming the top choice for companies as they allow them to test, measure, and adapt a range of portfolio solutions with very little capital outlay.
The attractiveness of flexible workspaces for large occupiers is also being heightened by the fact companies can capitalize on lower flexible workstation rates in CBD areas as a result of the pandemic.
The coronavirus pandemic impacted the real estate industry worldwide. Specific to the flexible workspace industry, increased demand from previous years had led to rapid growth in flexible space supply; when the pandemic hit, flexible workstation rates were slashed as operators competed to retain members and attract new ones.
The result of this is a buyer’s market; companies can acquire quality space in central locations at a lower cost.
“With increased provision of larger spaces and floor plates within the flexible market and relatively lower rates, there has never been a better time for clients to occupy agile workspace.”
But not for long.
The Instant Group argues that “rates could well quickly rise in line with growing demand, meaning the buyer’s market we see at the moment won’t last forever.
“With clients wanting to upgrade their office offering in order to improve employee experience and help to attract talent, businesses can now capitalize on quality providers currently offering reduced rates in prime locations in order to achieve this.”
Flex is the Future of the Office, so is Suburbia
While it is true that remote work is here to stay, the office is far from dead. The Instant Group argues that “large companies in particular still need a central HQ in order to enhance their company brand and culture.”
Moving forward, the office will be the main driver of collaboration, networking, and learning. But the office won’t be a standalone destination, rather it will be part of a network of hubs that include office and remote working.
Flexible workspaces will be a core element in these new networks of offices. There’s a big opportunity for flexible workspace operators to grow, especially in suburban areas where supply of quality space with the right amenities is scarce.
“The importance of location has been thrown into question and many occupiers are starting to consider the move to a hub and spoke model – a centrally located core office which is supported by suburban hub and home working.”
The shift to suburbia has been documented in the United States, but other regions are seeing similar shifts. In Australia, The Instant Group identified that occupancy levels in the outskirts of cities were higher than the city average.
“Whereas average occupancy levels have dropped within Melbourne CBD between the early stages of the pandemic and Q2 2021, rates have risen by 4 percentage points within flexible workspaces located on the outskirts of the city. Current occupancy levels in the outskirts of Melbourne are also currently higher than the city average of 66%, clearly indicating that employees are favoring locations in the suburbs rather than the city center.”