One area of property most affected by Covid-19 and the rise of home working has been flexible office space. I caught up with Jonathan Weinbrenn, Managing Director of BE.Spoke – a BE Offices company, on the future of this sector and its place in the changing London market.
First of all, some quick definitions. Flex space is an umbrella term that covers co-working, serviced offices and managed space, although these concepts are fast merging with each other. At the same time, the conventional market is adapting with landlords delivering Cat A + and turnkey space, all providing businesses with a range of workspace options.
Although changes have been seen in this market for some time, Covid has without doubt increased demand, with a significant growth in flex space generally as people reassess how and where they work, and businesses respond to the hybrid working pattern that the pandemic enforced.
Weinbrenn is certain that change is going to continue. “I don't foresee the death of the lease by any means. But if we look at our market, maybe five years ago, flex probably accounted for about 2% of the overall office market in the UK, and we're probably now up to about 8% of the office market as a whole. I can only see demand for customer-centric solutions increasing as time goes on.”
The greatest change so far is in managed space, which saw a significant uptake in transactions when lockdown ended. A typical client base for a serviced office offering tends to be a combination of startups, SMEs, and then corporates dipping into spaces. On the other hand, managed space predominantly services more sophisticated enterprise clients who, as Weinbrenn puts it, “actually have the full capability to self-deliver projects. They've been doing this for forever. They're not cash-poor, but they really value a solution that wraps everything up for them. And at the same time, buys them a lot of agility. That's just what drives them, and drivers will be slightly different for individual businesses, but the most common driver, probably, is flexibility of term and creating the ultimate experience for their staff.”
These clients might find it impossible to do a direct deal with a landlord in a great building for a short lease length. “Term is important; term is one of the key aspects that makes our proposition quite appealing,” Weinbrenn adds. “And post-COVID I think having flexibility of term is even more important. Many corporates were already starting to struggle with projections on headcount and now there’s more hybrid working and remote working; it's very difficult for a big business to plan for, say, five or 10 years now. They're quite keen on buying maybe at a premium, a bit more flex into their strategy.”
“They see the value in our proposition where we're quite happy to fund the capex and actually put forward a totally customised build programme so that the space reflects the client's brand, reflects their image and reflects their identity. But we're happy to fund that and then just amortise that through the deal, and they like that, because they can then invest their capex in their talent, the workspace experience that we create in partnership with them and in technology and R&D. That's probably a better ROI, than putting it into a desk and a chair that ultimately has a lifespan of four or five years.”
This human-centric approach is now shaping much of the flex office business. There’s much greater engagement now from our customers’ HR and IT departments and the stakeholders themselves. Staff surveys capture what teams need from there space and activity based working zones are now more sought after, with quiet and active zones and other areas that feel like being at home or even a members’ club.
Wellbeing and sustainability is the main driver in workspace design – for everyone from a big corporate to a smaller SME. “There's an expectation that wellbeing must be front and centre, Weinbrenn says. “And equally, everything around ESG needs to be properly addressed so it's not just a tick box exercise. When we're looking at buildings on behalf of a client, if those buildings don't meet certain criteria they're immediately dropped off the list. A few years ago, maybe there was an element of paying lip service to ESG, sustainability and wellbeing; now, it's very real and tangible. And the layering of service and F&B provision and wellbeing provision is really exciting to see.”
Finally, there is such an expectation now from employees at a time when pressure on recruitment and retention has just reached fever pitch that companies are fully responsive to their staff in a way they never were previously. They’re no longer competing against another firm in another office, but against someone who says ‘Look, I'll work remotely, and maybe never use an office.’”
“So how do we make our offices actual destinations, rather than just places where someone has to come to?” Weinbrenn finishes. “That’s a key differentiator that’s embedded within our DNA: the ability to pre-empt the expectations of someone coming to our workspaces. Amenity-rich, hospitality-rich, embedded technology and outstanding service. If you can fulfil these, you're onto a winning formula in a market that's going to be increasingly competitive.”