More and more businesses are voting for the advantages of flexible offices over conventional, long-term rental contracts. The Savills Spotlight research investigated why flex offices are growing in popularity and what their market prospects are.
Time for adaptability
Flex offices provide companies and organisations with the option to sign a licence agreement for office space for a shorter amount of time and with more flexible lease terms and conditions than a traditional lease. This provides more adaptability given the current (economic) uncertain times allowing to trial different types of company policies regarding WFH (work from home) and mandatory office days.
Flex growth has been particularly prominent in Central London, with flex take up eclipsing 20% of the total market prior to the pandemic, whereas in mainland Europe flex demand peaks at 9% of total demand pre-pandemic – Savills writes in its Spotlight research. The report finds that businesses continue to seek space to scale up or down to cope with business growth or shrinkage.
Lower Fitout costs, more services, better location
Given rising fitout costs and delays in handovers occupiers have opted for flex operators in order to increase the speed of occupation as flex offices typically come fully fitted out and ready to move in with limited adaptation needed. On top of all, flex offices are typically more modern with enhanced services and amenities in prime locations – the report finds.
B2B and financial service providers are catching up with the tech sector
Traditionally, flex office occupiers have been smaller start-up companies in the tech sector. However, there is a visible shift in occupier type post-pandemic, with more corporations and larger scale-up companies active in the B2B and financial services now taking up flex office space. According to the Flexmark report, one of the explanations for this shift is that companies are looking to test the new way of working policies. This is likely to impact conventional office demand for the 500-1,000 sqm lot sizes.
Most in-demand features from flexible office members
Further mainstream corporate adoption has driven a demand for greater privacy in flexible offices. Workthere’s Flexmark data indicates the top five most in-demand features from flexible office members in Europe are phone booths (22%), internal meeting rooms (21%), extra passes for office space (15%), standing desks (11%) and collaboration space (10%). Additionally, 4% of Europe’s respondents reported a need for additional vehicle charging points, a higher proportion than any other region. Over the next five years, European flexible office operators expect the booking of space through online platforms as the biggest change.
Flex is expected to reach 20% of the total stock
Economic uncertainty will also help fuel demand for more flexible lease terms. The shift to additional amenities and a widening range of working forms coupled with the rising cost and timescale of fitting-out own premises will also support further demand for flex space. Savills anticipate flexible office take-up will account for 5% of European office take-up in 2023, and 6% in 2024. Over the longer-term flex office stock is expected to reach circa 20% of total stock, although this will vary significantly by location and working culture, as the definition of what is considered “flex” broadens.