The Global Relevance and Impact of the Flexible Workspace Industry
At The Executive Centre we are incredibly proud of the team we have assembled who are responsible for growing our network, developing exceptional new experiences for our Members and leading the charge as our industry continues to rapidly evolve and change. As part of our ongoing series of ‘Executive Opinions’ we will be inviting Members of our HQ and regional teams to share their insights and expertise on different aspects of our business. In this piece, we invited Global Accounts Manager, Sebastian Stiles, to share his perspective and observations on the flexible workspace industry as it continues to evolve, changing both the way we do business and the way we serve Members. In his time with The Executive Centre, Sebastian Stiles has worked with a multi-disciplinary approach across the expansion and business development teams, having first joined TEC as part of our graduate program. He has been focused on the opening and lease-up of new centres, with experience in Hong Kong, Vietnam and most recently, Melbourne.
Today’s version of the workplace is rapidly evolving due to changing business and social contexts. Global economic growth is slowing, and instabilities in the current social and political landscapes are obvious. There is international trade and political uncertainty and businesses are wary of longer-term investment and commitments. The processes of urbanisation and globalisation are also apparent and result in a more interconnected world, and consequently an increasingly mobile workforce- a workforce which is now dominated by Millenials. Shifting urban preference sees real estate prices rising significantly and markets reaching their peak in cycles across most core, global cities.
Making use of the breakout area in our Melbourne location at Collins Square.
Traditional Versus Flexible
Office leases can be categorised in two ways. The first being a direct lease by which an occupier will be locked into a long-term lease directly with a landlord. These leases tend to be priced per square foot and are subject to additional costs such as facility management, service charges and the upfront capex to fit out the space. The second type of lease is a two-page license agreement with flexible terms and conditions. These tenancies are ‘plug and play’ options, fully-furnished and operational from the agreed commencement date.
The flexibility provided by the latter has become more mainstream and after initially attracting start-ups, is now attracting businesses from across the professional spectrum, including large corporate occupiers. Flexible workspaces are no longer considered to be a second option, and the industry is predicted to take up to5-10% of total office inventory in the foreseeable future.Products range from fully open-plan, coworking style shared workspaces, to more corporate, superbly finished spaces that include collaborative areas, private office options as well as more and more bespoke solutions to meet the challenges facing modern corporates.
Despite the evolution of the “Serviced Office” era into the newly dubbed and all-encompassing “Flexible Workspace” industry, the key concepts of the product have remained consistent. The product is still focused on a shared office environment, in which an area of space is divided between office desks and additional amenities like reception desks, waiting areas, meeting rooms and breakout space, all staffed by an operation team. However, this is a somewhat monotone explanation that does not truly reflect the dynamism of the industry.
The design of our Centre in Melbourne reflects the aesthetic of the surrounding city and gives Members the option of working from multiple collaborative spaces.
The Changing Face of Flex
The rise of Coworking and the hype around in-house beer taps and ping pong tables has triggered a renewed interest in the flexible workspace industry . Although they are not much more than exercises of vanity, this, coupled with significant investment, global media coverage, hundreds-of-millions spent on marketing and eye-opening valuations have formed a fiercely competitive market. Everything from creative cubes to flexible workspace providers have become prolific on a global scale. According to a report by Instant Offices, in APAC alone, there are now more than 2,200 different flex providers.
Another core contributing factor is focused on changing client demand due again to the influence of millennials in the work place. According to Gensler Research, new client demand has been fixated on engagement, team building and collaboration within the work place. Interestingly enough, the survey goes on to explain that employees are also demanding the inclusion of more private areas, claiming that Coworking is a supplement, not a replacement, to an ideal working environment.
Driven in part by the growing professional millennial population, this emerging trend has also shifted the thinking of large corporate occupiers. Organisations are re-evaluating their real estate portfolios to incorporate flexible options to provide near-term diversion from economic instability and flexibility, but also to appeal to this same millennial population. The younger worker tends to consider work-life balance, or rather lack thereof, when exploring corporate options. They recognise that life is no longer clearly divided between work and personal aspirations, but instead, our identity is made up of both aspects, making it a priority to be able to find deep satisfaction in all aspects of life. From sit-to-stand desks to breakout areas , organisations are starting to incorporate elements of flexible workspace design in order to attract young talent.
Coworking at our Three International Tower Centre in Sydney is a popular among Members looking to make new connections and grow their professional network.
Never Underestimate Niche
In 1994 corporate mentality towards commercial real estate and workspace design was extremely different from what we see today. Employers viewed their office as simply a space to work the 9 to 5. Trends in shared and flex workspaces have proven to be popular across the board. Demand only continues to rise, and the market is becoming noticeably oversupplied. For clients, they now enjoy more choice of flexible workspaces than ever before.
So, why flexible workspace and why now? Well, the core benefit is embedded in the name - flexibility. Lease length, ability to expand and contract, the additional amenities, flexibility to physically work across markets, engage with a wider community and ultimately, the reduction of upfront costs, time, energy and resources – all of these factors together create the ‘perfect’ working environment for a client. We are experts in curating an environment that fosters productivity and collaboration.In an era where evolution is necessary to succeed, we provide the tools every business needs to quickly and effectively meet the demands of their industry .
At The Executive Centre, we have evolved our product offering in response to changing client demand, addressing the highly specific and nuanced needs of our Members. For most providers, their goal is to gain market share and assert dominance via their ‘square footage’ facto instead of curating a niche product offering and taking the time to understand true client demand. The underlying benefits that flex space presents to ambitious corporates go largely unnoticed by many providers. Working from the communal lounge is Sydney's Three International Tower is always a popular choice for informal meetings.
Our emphasis on impressive design, functional spaces and unparalleled service has helped establish a network of global, like-minded businesses and individuals. Through aligning with premium Grade A developments and business addresses, TEC operates over 130Centres that continue to target our corporate niche. When TEC launched in 1994there were only hand a handful of notable competitors and the industry was largely unknown. In the highly competitive flex landscape, we have maintained our values and our core ethos to assert ourselves as a valuable and long-term competitor in the market.
TEC’s demand-driven expansion into new Asian markets is confident in its understanding of the demand for flexibility. Although there is increased volatility that comes with migration of business to new or emerging markets may act as a deterrent, it equally serves as a catalyst for exciting business activity - a place where flexible demand really hits its stride.Although having traditionally targeted established and high-net-worth businesses, recent years sees demand driven by larger corporates and MNCs. This accounts for TEC’s make-up of MNCs now north of 75%. Large corporates are now looking for more flexible solutions to add to their real estate portfolios. With increased volatility and increased complexity in global economies due to less long-term visibility, technology and workspace transformations, flexible workspace solutions are providing a platform which has redefined the way we work.
The Future Is Flexible
The industry has seen significant changes in the last 25 years and particularly in the last 5 years. An array of new products have entered the market, and client demand has evolved. The flexible workspace industry is here to stay, but what will it look like in the future?
Consolidation due to companies competing for market share will be met with an economic downturn thanks to over-extended leasing commitments. While hot-desking provides a solution to the increasing millennial population, it will not remain as a long term strategy, particularly for our Members. Instead, it presents itself as a stepping stone that offers users the chance to work alongside more established companies. In the near future, we are likely to see corporates leveraging flex space as a core real estate solution for expansions into new markets outside of their headquarters and in tightly supplied markets. Locally or regionally focused SME’s equally stand to gain from this foreign investment.
As the industry evolves, TEC will be leading the changes, supporting Members and growing our presence around the world. The future looks bright, for both our industry and our growing network of professionals.