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In these extraordinary times, we have all had to adapt our working practices and many us are now working from home. It is therefore inevitable that this move is changing the way that businesses think.
Companies that were seeking to move, perhaps because their office lease was coming to an end are now delaying or postponing their office search. This is due to the current uncertainty and the impact it will have on their business and headcount, but also because it is showing businesses, many for the first time, that they can operate remotely and do not need such large office spaces.
Traditionally, co-working and flexible offices had a reputation for attracting start-ups, particularly those in the tech sector. This is no longer the case and businesses of all types and sizes are beginning to see that they can embrace this type of workspace.
- Technology. Technology has been the most significant driver of the growth in co-working, primarily because it has caused a shift in the way people work. People can now work from anywhere, which COVID-19 has highlighted and proved for many businesses.
- Employee retention. Offering employees flexible working and hot desking opportunities is good for talent retention.
- Uncertain market conditions. COVID-19 and Brexit both create an uncertain environment in which more businesses favour the flexible model than would otherwise do so.
- Cost. Flexible leasing arrangements can help companies avoid sitting on unused space and operate more efficiently as the size of their workforce changes.
A CBRE survey from 2018 revealed that two-thirds of companies plan to incorporate a shared desk workplace strategy by 2020. With recent events this is only going to be accelerated.
Despite these opportunities, we must not underestimate the risks that the sector is facing right now.
Uncertain markets mean businesses that are using flexible offices will be taking advantage of the flexible lease provisions and cancelling their contracts.
There is therefore a fear that if we do not emerge from lockdown quickly, some providers will not survive, particularly where providers have a landlord that will not lower or suspend upcoming rents.
Despite the short-term risks. When normal service is resumed, many are confident the flexible office market will bounce back strong (although, we are sure that pandemic clauses will be added to flexible office space operator leases).
Impact for property owners and investors
The coronavirus outbreak has demonstrated the benefits of not being tied into long leases, which we are sure will mean that corporates will be more inclined to consider coworking and flexible workspaces.
Many property owner/investors in central London are aware of the rapid growth of early adopters, such as WeWork, and we wouldn’t be surprised if they are now looking at how to address the opportunity themselves. Landlords will now see a flexible office offer as an essential part of a large mixed-use development going forward.
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