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Already an established flexible office space provider, Work.Life are partnering with Knight Frank on a unique new managed office solution. Yours. by Work.Life offers larger businesses of 30+ access to all the great benefits of flexible coworking, with their own private office space, branding and design.
We sat down with Knight Frank’s James Nicholson to discuss the flex market, managed office solutions, and the launch of Yours. by Work.Life. Find out more about the benefits of Yours. managed office spaces for businesses; and get in touch today to book your consultation.
A huge change in the flex market over the last 5 years has been the massive upshift in both demand for and supply of flexible office space coworking. Since 2014, the market has more than doubled, and there are now almost 18,000 flexible and coworking spaces. This highlights a respective growth of 3,500% and 8,000% around the world since the start of this decade, accommodating almost 1.7 million workers. London has been at the forefront of this growth.
Businesses are operating in times of unprecedented uncertainty, much of which is driven by the rapid advancement of technology. Almost every business is undergoing digital transformation, as well as using new tech to harvest and analyse data to drive actionable insights and continuous improvement.
The upshot is that business planning horizons have shortened significantly. Businesses need to be more adaptable to new learnings and change, and therefore build more flexibility in their business strategies. This flexibility needs to be replicated in their real estate strategies too; which has created a growing demand for more flexible office space coworking solutions.
But it is not just about flexible lease terms. The modern flexible workspace market is providing workspace-as-a-service. Flexible office space providers streamline the customer journey from beginning to end, delivering design-led, plug and play, collaborative workspace environments, and complimenting these with ongoing services that address the needs of modern businesses and their workers. So good are modern flexible office space providers at doing this, that for many businesses it is no longer necessary, or attractive, to take on the full operational responsibility of acquiring, fitting out and managing their own office space.
The adopters of workspace-as-a-service are not just early-stage or fast-growth businesses, but also larger corporates who are also now adopting a ‘core and flex’ approach to their portfolios. And this is perhaps the most significant evolution in flex in the last few years – the size and maturity of companies taking flexible office space is on the rise.
In the so-called ‘core and flex’ model for corporate real estate, core operations are housed in premises on longer term leases, but everything else is taken on a more flexible, serviced basis – enhancing flexibility, reducing operational burden and allowing third party expert operators to deliver a great workspace experience, as a service. It’s not uncommon to hear real estate directors say they anticipate 30-50% of their real estate turning to more flexible solutions in the next few years.
Despite this clear growth in demand, ‘flex space’ supply still represents less than 10% of office stock in all major global markets, so it is anticipated there is still room for growth. The question is how will flex space evolve – does the original high dense, shared-services approach to flex office space really suit the needs of the more mature occupier, or is there a better option? There hasn’t been, but hybrid solutions that bridge the gap between serviced offices and traditional leases are emerging, and we expect these to be more attractive to these occupiers.
We have seen a few operators establish themselves to be ‘operators of scale’ – establishing large (30,000+ sq ft) centres in each location they open. This has helped them to retain occupiers by enabling customers to grow within their portfolios, as well as attract new ‘enterprise customers’ – larger businesses – transitioning into flexible working space. However, only a few operators have been brave enough and sufficiently well-funded to scale in this way, and with recent developments we expect venture capital to be more cautious about investment.
This presents a challenge for the large-scale incumbents to continue to scale at the same pace, and also limits the scope for those established large scale players to be challenged. So, with a limited threat of competition, and tightening purse strings, this presents a window of opportunity for these larger operators to focus on profitability rather than growth.
But the flexible office space market is still early in its evolution, and there isn’t scope for anyone to be complacent; even these larger-scale, enterprise-focussed operators. I believe the new challenge for them will come from landlords themselves establishing their own operating capability or partnering with others to deliver similar solutions. We are seeing this already, but landlord’s readiness to embrace partnership solutions is growing daily and supply of landlord-led solutions will accelerate rapidly in 2020. The model here is different – instead of operators taking traditional leases, there will be more management agreements; where the landlord and operator agree to share more of the upside and downside together – more of a partnership model than we have seen previously.
For smaller operators, the key will be how to differentiate and stay relevant; having an acute understanding of the target customer and creating a tailored solution that meets their specific needs. We have seen this already with operators choosing to target particular segments, whether it is specific sectors/tech verticals, female founders, or carving out USPs like on-site childcare or a hardcore focus on wellbeing or sustainability. The opportunity for these providers lies in the fact that in 2020, there is widespread acknowledgement that the workspace is more than a place to work, but a platform of delivering a positive user experience not just for activities directly related to work, but also the wider needs of people beyond the scope of ‘work’. This opens many doors and niches to explore and hence differentiate.
Many similarities are drawn to the hotel market, where you have large scale operators like Marriot and Hilton, and then a much larger number of ‘boutique operators’, who have all carefully defined their target customer and found their respective niches in order to stand out.
Ever since serviced office spaces started catering to enterprise customers, marketing voids on sub-5,000 sq ft suites have increased significantly. This is because occupiers seeking office space have been increasingly attracted to serviced office solutions.
Why? For many businesses, the responsibility for finding, acquiring and fitting out office space yourself – as required if taking on a traditional lease – is an inflexible and cumbersome process that is outside their expertise.
Taking space in a serviced office is much simpler, and in many cases provides access to an office environment and experience that would be cost prohibitive to create for themselves. However, the downside for businesses taking private office within a serviced office centre is that the space is prescriptive, there is little scope to create your own identity, and you typically share amenities with fellow members rather than having your own private facilities.
There is a growing number of businesses who want to the simplicity and convenience of a serviced office solution, but with the ability to bespoke and brand the space to create their own identity and to have dedicated amenities to meet their requirements. This is where managed office solutions have emerged as a preferable option.
Managed office solutions perfectly bridge the gap between prescriptive private office solutions offered by serviced office operators, and self-service options offered by landlords via a traditional lease. A ‘managed office space’ is created on-demand, so it is tailored to your needs, but the delivery is handled by a specialist operator who manages the end-to-end experience. In other words, all the simplicity of coworking serviced office space, but with your own front door.
Knight Frank’s partnership with Work.Life to deliver Yours. perfectly addresses the colliding old and new models of real estate, creating a unique proposition for our clients. Our industry knowledge, experience and strength of client relationships is unrivalled. Work.Life is an award-winning coworking office space business, and together we offer a credible, cutting edge, customer-centric solution to help our landlord clients introduce flex solutions into their portfolio, and helps to minimise void periods and maximise income.
The combination of the following makes Yours.’ managed office solution unique in the market.
Following the launch of Yours., Work.Life and Knight Frank are working together to deliver exceptional managed office service, that combines the agile working environment of coworking spaces, with the privacy and customisation of traditional leases.