Flexible Space Is In High Demand. How Can Landlords Capitalize?

Across the world, businesses are rethinking real estate — and many are landing on flexible space as the solution for their future office needs. The global flexible workspace market is anticipated to grow by 16.78% in the period 2020-2028, which will create a sector worth almost $41M.

In response, global flexible workspace provider IWG is expanding rapidly. The firm reported record demand for hybrid work solutions in its interim results for the six months ended June 2021, including in its franchise opportunity that launched in 2019. So far in 2021, there has been a 350% increase in committed locations for franchise deals compared to the same period in 2020.

Bisnow spoke to IWG Vice President Network Development, Americas, Michael Berretta to understand how the firm views the opportunities presented by the growing flexible workspace market.

Bisnow: How is the growth in flexible workspaces impacting corporate occupiers?

Berretta: The pandemic has been a catalyst for businesses to rethink how they view their real estate portfolios. Previously, occupying real estate would involve long-term, cumbersome agreements with requirements around build-outs and terms. Implementing this can be difficult from the point of view of keeping strategies dynamic, which is essential today.

Now, they can take a specific project or team and match their needs to more dynamic agreements. Instead of signing a lease for five or 10 years, they can make decisions that last maybe three months, six months or even two years, allowing them to grow, rethink and relocate to different geographies.

Bisnow: What impact is this having on the real estate market?

Berretta: To remain competitive, landlords need to rethink how they offer space in a way that attracts growth companies and corporate occupiers who now seek flexibility. Either they need to change the way they create space or align with providers such as IWG to facilitate this change.

Before the pandemic, flexible space was trending already, but the ways businesses have been affected has highlighted the need for more flexibility in real estate. A company can’t be saddled with a five-year business decision when needs can change so quickly.

Bisnow: How can businesses get the most value out of occupying flexible space?

Berretta: By sharing knowledge. As more companies are in the know about the concept of flexibility, they will weave it into the culture of their organization. It’s one thing for a business’s leadership to understand the benefits of flexible real estate, but the real value is when employees know how best to utilize it.

For example, a company might sign an agreement with a space provider for a business team. That company needs to know that the team sees the benefits including the ability to schedule impromptu meetings or work in different cities. There are lots of ways to leverage the power of a global provider to help existing employees and attract top talent by demonstrating you are a progressive business.

Bisnow: Can occupying flexible space impact productivity?

Berretta: There are many ways it can contribute to productivity, such as by reducing commute time. This is very important today to keep employees happy and reduce wasted time sitting in traffic. People will know they have a place nearby they can pop into as needed. Business travelers can have facilities wherever they travel rather than working out of a coffee shop.

Of course, more productivity creates greater profitability. But reducing costs on real estate that isn’t utilized well obviously benefits too. You can pay for space when you use it, which is a very different way of looking at real estate.

Bisnow: How can it be beneficial from an environmental perspective?

Berretta: The major benefit lies in reduced commuting time for employees. Think about the effect that can have on pollution, if they are traveling to a nearby flexible workspace occasionally rather than going to an HQ every day. Also, if you only use a building when you need to, you will use less space, which is more efficient.

As a corporation, IWG is focusing more and more on the environmental impact of the buildings we inhabit, on energy management systems and achieving the highest sustainability ratings.

Bisnow: What do landlords need to consider before offering flexible space?

Berretta: A typical landlord might have 10, 15, perhaps 20 businesses in a building or across a portfolio. From a property management standpoint, this involves having a few contracts on perhaps reasonably long-term leases.

In contrast, the flexible space business is much more dynamic. You could have 100 or more companies on a floor or two. Our business is obviously designed to be more short-term in nature, with many more moving parts than a landlord might be used to.

So, it’s important to align with a partner such as IWG to simplify management. The scope of our global network shows we are expert in managing a joined-up network for employees to access. This includes having sales professionals and experts running each part of the business, which is essential to being able to provide the service that corporate occupiers expect. 

This article was produced in collaboration between IWG and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.