COVID-19 redefined the workspace industry as work-from-home arrangements became increasingly common, but does this shift present opportunities for occupiers and landlords?
To continue reading the rest of this article, please log in.
Create free account to get unlimited news articles and more!
At a time when agility drives workspace strategies and companies’ demands for their office space increase, new research from The Instant Group has identified five trends within the workspace industry that have evolved during the last 12 months and the market opportunity they present during 2023.
- Demand for flexible office space rises across cities
According to the group, approximately 75 per cent of global flexible office operators are looking to expand, primarily with city centres, as a large portion of companies have implemented hybrid working arrangements resulting in their desire to encourage greater employee uptake of these standards while simultaneously increasing office usage.
This trend has concurrently led to employees returning to city centres and business leaders looking to provide more workplace options, “many with hospitality-led amenities that create an experience that draws in workers,” according to The Instant Group.
With this, demand and desk rates have risen. The latter half of 2022 saw demand increase across key global markets. Singapore was the biggest mover as demand rose 62 per cent, while demand grew by 20 per cent in New York City when compared to 2021’s figures.
- Landlords’ attention will shift to flexible workspaces
Despite greater risk, the flex market’s ability to generate three times as much revenue as traditional leases is expected to see an increased influx of landlords altering their offerings to match changing demands.
By 2025, thirty-six per cent of landlords expect to off their own flexible spaces, while 17 per cent aim to lease their space to an office provider and form a revenue-sharing partnership, according to The Instant Group.
Additionally, when 2025 rolls around, half of all surveyed landlords expect nearly a quarter of their portfolios to be flexible.
- Flexible offices will see higher near-term utilisation, ‘space-as-a-service’s’ prominence to grow by decades end
The data believes “space-as-a-service” will make up 25 per cent of the total office market by 2030; however, in the short term, there has been an increased demand — up 41 per cent year-on-year — in flex options such as coworking.
According to the group’s estimations, “coworking supply in its truest sense — the day passes, coworking memberships, and super-flex elements of the sector — will increase to encapsulate 5 per cent of the total office market (from less than 1 per cent today)”.
“The broader flexible office market, which includes private office space, will grow to 30 per cent of the total office market [while] the biggest segment will come from the ‘new’ CRE with a potential valuation of $1.3 trillion,” it said.
- In a bid to meet ESG targets, corporations will begin paying a premium on flexible workspaces
With environmental concerns growing for a large portion of the global population, and with the built environment reportedly generating 40 per cent of global carbon dioxide emissions, The Instant Group believes it is critical for the real estate industry to mitigate its contribution.
“In practice, this means that operators will be more likely to partner with landlords, suppliers, and wider stakeholders to mitigate their carbon footprint, as investments will be tied to sustainability credentials,” the group said.
This could lead to increased willingness with corporations to pay a premium of 10 per cent to 15 per cent for ESG target meeting flexible working arrangements.
- Global recession concerns will have CRE leaders choosing flexible workspaces over traditional office leases
In a volatile environmental market, cost-cutting — such as reducing long-term lease liabilities and leveraging flexible short-term lease options — makes greater sense.
With Instant’s Agile Think Tank suggesting the average company is predicted to downsize approximately 25 per cent within the first three years of taking an office, possessing the ability to right-size in line with utilisation delivers both cost savings and efficiencies, meaning more corporations will opt to pay the 5 per cent to 10 per cent premium for flexible workspaces.
Never miss a beat with
Stay across what’s happening in the Australian commercial property market by signing up to receive industry-specific news and policy alerts, agency updates, and insights from reb.
Subscribe to reb Commercial:
Comments powered by CComment