The demand for flexible workspace is set to accelerate, as over two-thirds of global corporates plan to increase their use of flexible co-working and collaborative space over the next three years, according to a new research from Knight Frank. The research showed that global corporates intend to operate increasingly from flexible, serviced and co-working spaces, which create a more collaborative working environment and offer freedom to expand and contract quickly, according to market conditions.
Knight Frank’s (Y)OUR SPACE report, surveyed senior executives at 120 global companies, which collectively employ in excess of 3.5 million people worldwide and occupy an estimated 21.65 million sq metres (233 million sq ft) of office space, equivalent to the total amount of office space in central London.
Commenting on the findings, Shishir Baijal, chairman and managing director, Knight Frank India, said: “With changing perceptions of the office, the workplace is now being looked at, as an environment that needs to be managed and optimised. It is being viewed as an instrument that could drive a dynamic and vibrant culture of corporate productivity, impacting financial, cultural and environmental ethos of the organisation. The co-working phenomenon is gaining wider acceptance with the mainstream Indian occupier, as big corporates today constitute approximately 50 per cent of the overall client roster.”
Five trends that will shape the office market
1. The productivity push v2.0: Post the global financial crisis, there has been an all-out attack by occupiers on the quantum and quality of occupied space. Although dressed up as supporting increased productivity, it had cost saving at its heart. There is now a new approach emerging: one which seeks to increase corporate productivity via a strengthened interaction between people and property.
2. Next wave technology = new business models = new demand: A new period of rapid organisational re-design, driven by the emergence and adoption of next wave technologies, such as AI and robotics, will influence the future form, function and location of the workplace.
3. Corporate constitutions change forever: The constitution of the corporate workforce is changing. Multi-generational workforces and a growing dependence on broader and deeper supply chains within the economy represent a new reality. Corporate real estate portfolios must follow suit and reflect the future shape of the organisation. Legacy real estate, which reflects a structure from the past, will simply stymie progress.
4. Space as a service becomes the demand default: The onset of co-working is having a huge influence on global real estate markets. The workplace is becoming a flexible business service that can actively support business growth, rather than a fixed and often (to the occupier) financially onerous physical product. This repositioning is alluring to the occupier and will become the demand default. Traditional landlords have little alternative but to adapt to this new dynamic and adopt the approach taken by the co-working ‘upstarts’.
See also: Co-working spaces to triple in three years: Knight Frank Report
5. Mobility and mergers condition future market demand: Occupiers are increasingly mobile. New organisations are being formed through increased M&A activity. Mobility and mergers bring greater complexity to the corporate real estate portfolio. However, they also extend the pool of active demand for global real estate markets.
Present and expected share of co-working spaces in companies’ profiles
Today, despite the proliferation of co-working and serviced office operators, a majority of global corporates occupy office space on a traditional lease model. Two-thirds of companies surveyed by Knight Frank reported that co-working, serviced and flexible office space comprise five per cent or less of their current office space. A small minority, less than seven per cent, said that flexible workspace exceeds a fifth of their total workspace.
However, Knight Frank’s research revealed that the proportion of flexible space within companies’ portfolios is set to increase dramatically. Over two-thirds (69 per cent) of global corporates plan to increase their utilisation of co-working spaces and 80 per cent expect to grow the amount of collaborative space they use over the next three years. Furthermore, 44 per cent stated that flexible space will constitute up to a fifth of all office space in the next three years. An additional 16 per cent estimated that as much as half of their workspace globally, would be flexible spaces, within the same time period.
Factors driving the demand for flexible workspaces
Over half of the companies (55 per cent) identified increased flexibility, as the main driver of this change, with a significant proportion (11 per cent) stating that the sense of community fostered among workers was the key benefit. A further 11 per cent stated that the greater speed to becoming operational, was the primary reason for selecting co-working or serviced office space, in place of more conventional office spaces.
The overwhelming majority of respondents (75 per cent) stated that personal productivity linked to well-being and happiness, would increase, as they shift towards a new flexible and collaborative model of occupancy that is more in keeping with today’s business structures and working styles.
Lee Elliott, global head of occupier research at Knight Frank, added that a decade of global economic uncertainty has reshaped how many of the world’s largest companies view workspaces. “Shorter business planning horizons, together with the emergence of new, more agile corporate structures, have driven demand for flexible spaces, which enable companies to react to change quickly. While co-working and serviced office operators have grown rapidly over the past five years, driven largely by start-ups and the freelance economy, this is only the tip of the iceberg, with latent demand from global companies set to emerge over the next three years,” says Elliott.
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