By GEMMA FOORD
In the not so distant past, the 2008 financial crash rocked the global economy and sent shockwaves throughout the flexible working sector. In the UK, there were casualties and a number of serviced office providers were unable to survive the impact. Today, we face-off against COVID-19. A virus indiscriminate in its reach that brings enormous challenges to both the health of the global workforce and our economies.
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 to the UK 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. Many coworking operators face an uncertain future as they rely, in the main, on short term monthly or quarterly contracts, often without deposit. This makes survival tougher for those operating on an 80 / 20 (open plan / private office) space model without positive cashflow and healthy reserves. Many providers remain positive that should the ‘lockdown’ be lifted in the next 12 weeks; they will ride it out. However, delays beyond this will no doubt cause casualties.
In 2020, with over 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 weather the storm. In London alone, where there are approximately 1,400 flexible workspaces, organisations are adjusting to the new normal, with staff working from home and prospective clients being offered 360-space online tours and pre-recorded videos to best share the spaces by proxy.
Shares in IWG, the world’s largest serviced offices firm, sank more than 16% last week following the implementation of various countrywide lockdowns. IWG’s Board has said however that they are confident in the long-term structural growth drivers of the global flex market. IWG has initiated talks with UK landlords to ask for a short-term rent freeze to help mitigate the impact on its business whilst the government continues to ask non-essential workers to stay at home. IWG is also the world’s largest flex space with more than 3,300 centres, spanning 100+ countries, and covering circa 62 million sq. ft. Another firm, Workspace, who typically provide offices for small and medium-sized enterprises (SMEs) has also seen a recent decline in their share price. However, given Workspace own their assets they are in a comparatively more comfortable position from the outset.
In the UK, and in line with the government’s lockdown measures, many providers have decided to send all staff home, but continue to operate centres with access via the use of digital key cards. Teams are supporting virtually with ticket systems. The main centres are still accessible 24/7. However most recommend accessing them within standard business hours.
Last week, a growing number of occupiers have been asking for flexibility and relief to see them through the pandemic, and in turn, conversations between provider and landlords are being held across the board. The news from the government last week that tenants unable to pay rent as a result of the Coronavirus will not be evicted for the next three months is a welcome measure and will allow each part of the value chain to do their bit to alleviate the pressures being felt by all. If the government were to introduce an outright ban on travel to work, providers would not face the prospect of being in breach of their contracts should they prevent the use of their offices, and in turn, risk voiding business continuity insurance policies.
With the current restrictions placed on workers, we will inevitably see downstream supply chains suffer the effects, especially for furniture and catering companies who have focused solely on the sector. The downturn is expected to spread globally. However, all is not lost. There are a number of innovative trends emerging to meet these challenging times.
We are seeing coworking start-up The Wing, based in New York, play a positive part in offering resources to stop the spread of the Coronavirus by donating the use of its 70,000 sq. ft of coworking space to government organisations, non-profits, or primary healthcare providers. We expect that others may follow suit.
An uptake in digital scheduling tools for flexible workspaces is expected. These will include platforms for issue management, coordinating teams, venue bookers, to HR management tools and even collaborative robots that interact with humans and work alongside them. Tools such as Hubspot meetings, Doodle, Eventbrite, Teamup, Google Calendar, Desktime, Nexudu and Cobot, to name a few, are being extensively used. Those offering seamless integration with existing software will make gains.
Space management software such as Office RND, Essensys and WUN Systems – with a large market share in the US, already support a large and growing number in the industry. We expect they will compete to find even more opportunities during this period.
Social distancing regulations and lockdowns in a number of countries to battle the COVID-19 outbreak are forcing the majority of us to work remotely. However, the trend has been on the rise for a while now, with regular ‘work from home’ growing 173% since 2005 according to Global Workplace Analytics. They estimated that companies save an average of $11,000 per year per employee for those who work remotely part-time, with further research indicating the best scenario is 2-3 days in the office per week.
Though it seems never-ending, this crisis will abate at some point. As we emerge from the other side of this crisis, we expect some changes in the flexible solutions market. We have listed a few trends we anticipate on the other side of the pandemic.
However much we embrace working from home as the new normal, teams will gradually also realise the importance of physical interaction and will want to get back into the office. A shift to creative workspace environments will ensure future productivity, wellness, engagement, and collaboration. However, we do anticipate that many businesses will also see a balance shift between the office and home working to provide a better work/life balance.
For the duration of this crisis, we recommend that organisations 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 organisations to recalibrate and pay attention to what works and what doesn’t – trial new technologies and embrace the change that homeworking brings.
A public health induced recession could very well rebound more swiftly than an economic event such as the 2008 financial crash, resulting in a steeper and quicker exit from the crisis. At DeVono, we will be monitoring geographic trends, competitive scenarios, and tracking opportunities that arise for the Flexible workspace market. We, like many of our clients, believe the market to be in good shape and able to weather the storm. Most of all, we’re all in this together. If we can help you take stock, either in an advisory capacity or assist you in your workplace journey, please get in touch.
"We were very satisfied with the service provided. You helped us find the perfect office to meet our needs and were prompt and effective in negotiating the deal on our behalf."
"Having appointed DeVono in March 2016 to find our next high profile London office from 2018, we have not been disappointed with their high level of service and meticulous attention to detail from the very first day, through to signing the Agreement for Lease and beyond. They assured us during the tender process that they would be right by our side all the way through and not just appointed to “do the deal” and this is exactly what we received."
"It was a pleasure working with DeVono - the team were very professional, knowledgeable and provided the right advice when needed. The most important aspect was that you took time to understand what we were after rather than position everything on the market. I would not hesitate recommending you and your firm."
"“We are delighted have found a home at Seven Dials Warehouse and commercial real estate framework that is not just fit-for-purpose now, it enables us space to grow in the future. DeVono Cresa has helped us to realise our ambition of providing a sustainable and ‘appropriate’ long term home for the business.”"
"I was impressed by the service I received from DeVono when it came to finding new offices. They considerably reduced the stress, hassle and time that this process would have otherwise involved and we are chuffed with the end result."
Thank you for signing up to Property AlertsOk