The Future of Flex: can UK flexible workspace bounce back?
After a bruising time during lockdown, the UK’s flexible office space sector could be poised to grow fast off the back of increased corporate interest, according to a new report from architects AFK with WORKTECH Academy
The flexible workspace market in the UK is set to bounce back from trading difficulties caused by the global pandemic as corporate occupiers seek a new formula in the hybrid world of work, according to a new report produced by architects Arney Fender Katsalidis (AFK) in partnership with WORKTECH Academy.
The research paper, ‘The Future of Flex: Flexible Workspace in the UK post Covid-19’, predicts that the flexible workspace sector could grab as much as a fifth of the total UK office market by 2023, given the right conditions. This growth scenario to 20 per cent exceeds previous forecasts suggesting expansion from 5 per cent to 12.5 per cent of the total market.
Search for right balance
Growth is projected to be driven primarily by large corporate occupiers, with flexible space operators expected to offload at least 80 per cent of their space to large corporates, compensating for a downturn in demand from SMEs, start-ups and freelancers.
Corporate interest in flexible space will be driven by a search for the right real-estate balance – whether as hybrid working arrangements kick in (with working time split between home and the office) or the adoption of ‘hub and spoke’ models, where a company headquarters (the hub) is supplemented by satellite offices or flexible bases closer to workers’ homes (the spokes).
Through interviews with leading operators, space providers, think tanks and new data, the ‘Future of Flex’ report provides a wide-ranging deep dive into the sector post-Covid-19. It suggests that the arrival of IFRS 16 – a new International Financial Reporting Standard for lease accounting which came into force on 1 January 2019 and allows businesses to, in effect, ‘write off’ short-term leases of less than five years – will make flex space even more attractive to large corporates.
Mixed-use in planning
A change in attitudes towards mixed-use developments post Covid-19 is likely to have a similar positive effect on the sector. The provision of flexible office space within mixed-use developments alongside retail, residential, wellness and community services and other uses is likely to be viewed positively by planners.
As large corporate occupiers become more central to the flexible space market, their staff wellbeing and productivity agendas will drive an improvement in flex facilities in areas such as environmental quality, location, service and amenities. Flexible workspace providers will be under pressure to adapt to these demands – those that meet them best, and soonest, will be more competitive.
The greater opportunity presented by the flexible workspace market will, in turn, accelerate the trend for traditional landlords to offer flex space, leading to increased competition between landlords and operators vying for the same large clients.
Shift to premium assets
Earle Arney, CEO at AFK, which designed Deloitte’s award-winning Toronto and Montreal offices, says this competition ‘will call for a
new approach to design of flexible workspaces. There will be a shift to premium assets, so the most successful future flex spaces will be those that are exceptional in their design, and in the standard of their amenity, wellness and biophilia in order to meet large corporate demand. They will also need to be sufficiently adaptable to flex to accommodate changes in working practices, such as hybrid or hub and spoke models.’
‘The most successful future flex spaces will be those that are exceptional in their design…’
Arney concludes: ‘As the sector grows, it will need more space too, so we also expect retrofit and adaptive reuse to play a much bigger role. The message is simple. Covid-19 has changed the office landscape, so the question is not whether flexibility has a future, but perhaps whether flexibility is the future?’
According to Jeremy Myerson, Director of WORKTECH Academy, ‘The flexible space sector suffered in the pandemic like most other businesses. But our report suggests that short-term pain could be followed a resounding bounce-back in the medium to longer term. If flexibility and agility are the new watchwords in the hybrid world of work, then it makes sense that the flexible office market should grow quickly.’
‘The Future of Flex’ report is based on research conducted initially for the British Council for Offices pre Covid-19 and then expanded on in 2020-21. Read the full report here.