No longer a disruptor, flexible workspace has evolved and matured into a newly emerged asset class of its own and is increasingly becoming a workforce model for enterprises. According to the latest 2018 Flexible Workspace Outlook APAC report released today by Colliers International (NASDAQ: CIGI; TSX: CIGI), a global leader in real estate services, a number of key trends as well as threats and opportunities are reshaping this rapidly evolving sector as the workplace disruptor becomes disrupted.
Sam Harvey-Jones, Managing Director of Occupier Services Asia at Colliers International, commented: “Constant expansion and increasing competition are driving continued evolution of the flexible workspace sector as operators and landlords are integrating lifestyle, wellness and technology elements to differentiate their offerings in an increasingly crowded market, and occupier demands change. Our report shows that the number of deals involving 15 desks or more accounted for 48% of total flexible workspace transactions in 2017—a 50% increase from 2016 (32%)
Flexible workspace operators and landlords with their own flexible space offerings are steadily building out their solutions to the point that some operators are transforming their locations into fully integrated lifestyle environments—boasting health, entertainment and other amenities. Operators are also becoming increasingly conscious that many occupiers are attracted to the less tangible aspects of a space—particularly the innovation, creativity and opportunities for collaboration that spring from dynamic communities.
New accounting standards that will require businesses to disclose their leasing commitments could spur demand for flexible workspace as companies act to keep debt off their balance sheets—but the trade-offs may not be as straightforward as they initially appear.
Regulatory changes should have a positive impact on the flexible workspace sector, pushing multinational corporations to take less core space on traditional long-term leases and rely more on flexible workspace operators to provide the flexible space to deal with temporary headcount swings and, in some cases, the amenities that an occupier may have previously self-delivered.
Threats and Opportunities
Jonathan Wright, Asia Pacific Head of Flexible Workspace Services at Colliers International, commented: “As the sector evolves, it is both supported by and under pressure from market trends, changing regulations and shifts in the composition and expectations of end-users. How operators, landlords and occupiers respond to these realities will dictate the industry’s development going forward.”
Landlord interest in the sector is growing, presenting dedicated flexible workspace operators with a new source of competition. However, in developing flexible workspace brands, landlords are sometimes struggling to achieve the right balance between providing an amenity and a commercial operation added to this; landlords can lack the necessary economies of scale and geographical spread for multi-location enterprise occupiers.
Operators are hoping to cultivate a multinational client base, but as more large companies occupy large desk counts within flexible workspace locations, there is a fear that they will simply become repackaged office buildings with end users existing in silos, reducing their appeal and alienating the start-ups that create the buzz of a community and bring much-needed innovation.
“Opportunities do exist amidst these challenges which are likely going to be the potential for landlords and operators to forge partnerships and complement each other’s core strengths with new models. In terms of corporate occupiers, the opportunities here are obvious, but efforts should be made to cultivate a community through effective change management which can help foster a vibrant tenant base and create stickiness keeping landlords and operators at the leading edge of an evolving yet emerged sector,” Mr. Wright explained.
Alternative Leasing Models
Flexible workspace is also enabling innovative leasing models that reflect the increasingly dynamic and decentralised nature of business. In the “Flex and Core” model, a company combines a long-term lease with a traditional landlord for its core space (e.g. headquarters) and an agreement with a flexible workspace operator to accommodate sudden changes in headcount. This allows firms to deploy additional resources for projects or surges in demand with minimal overheads.
The “City Campus” model allows businesses to expand quickly across cities and international borders by supplementing a central location or headquarters with a digital platform that enables staff to access temporary hot desks or private offices across multiple flexible workspace locations.
Mr. Wright added: “Most occupiers are already using or considering using flexible workspace in some capacity. First-tier cities in China as well as key emerging markets including Jakarta, Bangkok and several Indian cities could lead the future growth of flexible workspace in the Asia Pacific region.”
To download a copy of the full report, visit here
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Colliers International Group Inc.(NASDAQ & TSX: CIGI) is an industry-leading real estate services company with a global brand operating in 69 countries and a workforce of more than 12,000 skilled professionals serving clients in the world’s most important markets. Colliers is the fastest-growing publicly listed global real estate services company, with 2017 corporate revenues of $2.3 billion ($2.7 billion including affiliates). With an enterprising culture and significant employee ownership and control, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include strategic advice and execution for property sales, leasing and finance; global corporate solutions; property, facility and project management; workplace solutions; appraisal, valuation and tax consulting; customized research; and thought leadership consulting.
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