How flexible space is leading companies to rethink their real estate

More European companies are experimenting with flexible office space to cater for 21st century work life and better position themselves in a fast-paced business environment.

March 07, 2019

As today’s companies aim to become more agile and their workforce becomes more mobile, their space requirements are changing fast.

While the majority of their real estate portfolio is still made up of longer-term fixed leases, growing numbers of companies are experimenting with flexible office space to get the most from their employees and best position themselves in a fast-paced, rapidly-evolving business world.

“Flexible office space helps them to attract specific talent pools, particularly younger generations, who tend to favour a less traditional corporate office setting while meeting the requirements of specific teams in areas such as digital or product innovation,” says Tom Carroll, Head of EMEA Corporate Research at JLL.

“For some companies, flexible office space enables them to act quickly if they need a temporary space, or to access a new market. For others, it’s an opportunity to increase exposure to the zeitgeist in a particular industry or to help change their working culture.”

Back in 2015, JLL predicted up to 30 percent of corporate portfolios could be co-working or flexible space by 2030 – a figure supported by its latest report Flexible Space: Transforming real estate.

And with Europe’s flex space market growing rapidly – up by as much as 35 percent a year over the last three years, and with further growth on the cards – companies have never had more choice in finding additional space that meets their unique needs.

Catering for 21st century work life

The new generation of flexible space is shifting corporate attitudes with both coworking providers and landlord-created platforms providing high-quality, amenity-rich workspaces that go well beyond merely offering bottomless coffee and a desk. Instead, their networking events, social and dining areas and creative designs promote a sense of community and encourage collaboration.

And although new formats are springing up across Europe and the rest of the world, Carroll believes more could be done to entice companies. “Integrated technology, workplace data analytics and space utilisation improvements could also significantly drive demand,” he says.

“If flex space or coworking providers can demonstrate sustained evidence of improvements in how companies are getting more from the spaces they lease, and this can be scaled, we will see an acceleration in enterprise adoption.”

In the meantime, these new models are addressing some of the cost concerns that made many corporates reluctant to adopt flexible space in previous years.

“With the new generation of flex space, users tell us that, in some cases, it’s cheaper to embrace flexible office space than commit to a conventional lease, along with all the operational and capital expenses it might incur,” says Carroll. “Some providers are offering innovative pricing and deal structures as they seek to boost demand, although the long term viability of these remain untested.”

However, Carroll adds that for many companies, cost is not their first consideration as they place a higher premium on bringing different teams together.

Concerns also remain over other aspects of flexible space arrangements, whether security, confidentiality and privacy in more open environments, brand dilution or the quality of the fit-out.

Yet on the flipside, as flex space becomes more mainstream, there’s the risk of being behind the curve. “As increased mobility, superior connectivity, state of the art fit out and a range of leisure and hospitality services become the norm, no company wants to be perceived as stale,” says Carroll.

Finding the right balance

Although more companies are considering or trialling flex space, it’s far from being a one-size-fits-all solution and won’t be the right move for every company, especially those who are very conservative in their real estate operations and outlook.

Indeed, even companies who are more experimental will differ significantly in the way they take-up flexible space.

“We see a range of strategies emerging based on the needs of individual businesses and even teams. While experimentation continues, and provision remains embryonic in some areas, the appetite for flexible space from SMEs to multinationals is increasingly clear cut,” concludes Carroll.

“It’s likely that, as we see larger and more ‘traditional’ companies deploying these concepts at scale, we will see a swift shift along the adoption curve for more conservative adopters.”