As much as 2008 can be a distant memory for many, some will remember it well. A financial crash that turned the global economy upside down. And a crisis that sent shockwaves through the flexible working sector.
Some sectors were hit much more than others, yet it was the office space providers that struggled to survive.
Q1 2020 hedge fund letters, conferences and more
Back to the present, and the global economy is now faced another unprecedented crisis. COVID-19; the worldwide pandemic that is causing major disruption to our economies and endangering the lives of our global workforce.
DeVono Cresa, the occupier-only consultancy firm gives us insights into the impact that the pandemic is having on flexible leasing.
Gemma Foord, Head of Flexible Leasing & Consulting at DeVono Cresa, highlights: “Looking back, coworking did not exist at that time in the way and at the scale that it does today. With around only 100 coworking spaces globally at the time of the 2008 crash, the impact was minimal. Incidentally, the crisis was believed by many to be good for coworking as the hit to the economy meant companies and freelancers would switch to more flexible coworking solutions.
In the years to follow, open plan and collaborative coworking spaces grew exponentially to approximately 14,500 spaces worldwide in 2019. Fast-forward to today and it’s a different story.”
Non or little deposits, term monthly and quarter contracts are what many coworking space operators will rely on as their main source of income, so it comes as no surprise to why survival for flexible leasing companies is proving extremely difficult. Especially with a global pandemic on our hands.
However, many providers are finding themselves remaining optimistic that should the restrictions of lockdown be released in the next 12 weeks; they will be able to ride the storm. But delays beyond this will no doubt cause long-lasting damage to businesses.
The flexible leasing market in 2020, reported 32,000 flexible workspaces worldwide representing 521 million sq. ft and a global market value estimated at $26 billion, the sector is well-positioned to survive the disruption of the pandemic.
In London, the UK’s capital has approximately 1,400 flexible working spaces and staff must now adjust to the new normal of “working from home” meaning prospective clients will receive a slightly different customer experience. New customers are now being offered 360-space online tours and pre-recorded videos to communicate the spaces by proxy.
Rent-Freeze Is A Huge Relief For Occupiers
Due to the implementation of the worldwide lockdowns, the world’s largest serviced offices provider IWG, reported a 16% drop in shares last week. IWG’s board reported that they are “confident with the long-term structural growth drivers of the global flex market”.
IWG are not the only ones requesting rent relief, a growing number of occupiers have also been asking for flexibility to see them through the pandemic, conversations across the board are being had between many occupiers and landlords.
IWG is also, the world’s largest flex space with more than 3,300 centers, spanning 100+ countries, and covering circa 62 million sq. ft. Another office space provider Workspace, typically only providing offices for small and medium-sized enterprises (SMEs) has also reported a recent deterioration in their share price. However, in comparison to IWG, Workspace owns its assets, indicating that they are in a far more comfortable and secure position.
Emerging Trends
With the current restrictions placed on workers, we will inevitably see deterioration within supply chains and the downturn is expected to spread globally. Those most likely to suffer will be the ones operating in furniture and catering markets, who are solely focused on one sector, this, unfortunately, will have a negative bearing on businesses. On the other hand, there are several innovative trends emerging to meet these challenging circumstances.
In New York, coworking start-up The Wing” is one brand leading by example. They have played an admirable part in helping to stop the spread of the Coronavirus. The Wing has donated its 70,000 sq ft coworking space to those who need it most, and it is available for the use of government organizations, non-profits, and primary healthcare providers. It won’t be long for others to follow suit.
The Use Of Digital Scheduling Tools Is On The Rise
Digital platforms such as Hubspot meetings, Doodle, Eventbrite, Teamup, Google Calendar, Desktime, Nexudu, and Cobot, just to name a few, are now being heavily incorporated within organizations. A rise in digital scheduling tools for flexible workspaces is also predicted. Additionally, the inclusion of issue management coordinating teams, venue bookers, HR management tools and even collaborative robots that interact with humans and work amongst them. Those organizations, able to seamlessly integrate with existing software will undoubtedly make gains.
For Many "Work from Home" Is Not A New Concept
The Social distancing regulations and lockdowns in several countries have been enforced to battle the COVID-19 outbreak and slow the spread of the disease. With countries across the world finding themselves in lockdown, this is causing are the majority to work remotely. However, the trend has been on the up for a while now, ‘work from home’ has grown 173% since 2005 according to Global Workplace Analytics. It was estimated that companies save on average $11,000 per year per employee for those who work from home, part-time, with further research detailing the best scenario for employees is being in the office 2-3 days per week.
DeVono Cresa’s Trend Predictions Beyond COVID-19:
There is no guarantee for what life will be like post COVID-19, but what can be said is, the crisis will abate at some point. Life after the virus will undoubtedly be different, and we should expect to see some changes in the flexible solutions market:
- Segmentation of the market – coworking spaces and serviced offices (depending on the length of the lockdown)
- Competitive landscape – regional penetration and acquisitions as the market should bounce back quickly
- The opportunity for new insights and R&D projects performed by proxy, to look at production footprints. How we space plan and look for efficiency gains will itself evolve as the workforce dictates, with potentially changed working practices
- Portfolio expansion opportunities will arise for market players to expand their foothold
- The software market will experience gains within the sector
- Where risk is shared; we expect the growth of the management agreement model
- Many businesses will also see a balance shift between the office and home working to provide a better work/life balance.
Flexible leasing And Beyond: Conclusion
As much as employees are embracing working from home as the new normal, individuals will begin to realize the importance of physical interaction and will soon enough wish to get back into the office environment in which they are somewhat used to.
Foord suggests: “Organisations must focus on the support that clients might need while being sensitive in your firm’s approach – work with integrity, and show compassion. Teams and personnel will be more accessible due to working from home. This is the time for organizations to recalibrate and pay attention to what works and what doesn’t – trial new technologies and embrace the change that homeworking brings.”
