The demand for flexible workspace is set to accelerate as over two-thirds of global corporates plan to increase their use of flexible co-working and collaborative space over the next three years, according to new research from Knight Frank.
Knight Frank’s (Y)OUR SPACE report surveys senior executives at 120 global companies, which collectively employ in excess of 3.5 million people worldwide and occupy an estimated 233 million sq ft of office space.
The research shows global corporates intend to operate increasingly from flexible, serviced and co-working spaces, which create a more collaborative working environment and offer the freedom to expand and contract quickly according to market conditions.
Ben Burston, Partner, Head of Research & Consulting at Knight Frank Australia, said: “The ample scope for the growth of the co-working sector in Australia is reflected in the relatively low share of co-working space as a proportion of total office stock. In Sydney and Melbourne co-working represents only 1.3 per cent and 1.2 per cent of total office stock respectively, well below the share of stock in London (4.0 per cent) and New York (2.5 per cent).”
Dermot Lowry, Partner, Head of Occupier Services at Knight Frank Australia, said: “The demand for flexibility is the single biggest threat – and opportunity – to owners of office space. The recent boom in co-working is indicative of a structural change within commercial real estate whereby companies desire space that is flexible, highly serviced and aligned within the realities of doing business in an age of disruption. Some co-working operators have capitalised on this already, but it is imperative that owners and developers react to the new reality where the customer is king.”
Mr Lowry said he is seeing five key themes that will shape future occupational demand across global real estate markets.
“These themes include: increased productivity; technological advances; changing corporate constitutions; flexible space; and increasing mobility of organisations.
“This increasing role of real estate as a strategic business tool has played out in Australian markets, with organisations relocating to buildings and precincts possessing an abundance of amenities – a shift that has redefined and broadened the meaning of ‘quality’ for occupiers.
“Key CBD markets have seen this play out with record low vacancy; however, well-located fringe and suburban locations are also witnessing an increase in demand, based on a community and cultural amenity that does not need to be built but already exists.”
Today, despite the proliferation of co-working and serviced office operators, the majority of global corporates occupy office space on a traditional lease model. Two-thirds of companies surveyed by Knight Frank reported that co-working, serviced and flexible office space comprise five per cent or less of their current office space. A small minority, less than seven per cent, said that flexible workspace exceeds a fifth of their total workspace.
However, Knight Frank’s research reveals that the proportion of flexible space within companies’ portfolios is set to increase dramatically. Over two-thirds, 69 per cent, of global corporates plan to increase their utilisation of co-working spaces, and 80 per cent expect to grow the amount of collaborative space they use over the next three years.
Furthermore, almost half (44 per cent) stated that flexible space will constitute up to a fifth of all office space in the next three years. An additional 16 per cent estimated that as much as half of their workspace globally would be flexible space within the same time period.
Over half of companies (55 per cent) identified increased flexibility as the main driver of this change, with a significant proportion (11 per cent) stating that the sense of community fostered among workers was the key benefit. A further 11 per cent stated that the greater speed to become operational was the primary reason for selecting co-working or serviced office space ahead of more conventional office space.
The overwhelming majority of respondents, 75 per cent, stated that personal productivity linked to wellbeing and happiness would increase as they shift towards a new flexible and collaborative model of occupancy that is more in keeping with today’s business structures and working styles.
Mr Burston said, “This research underlines that a decade of global economic uncertainty has reshaped how many of the world’s largest companies view workspace.
“Shorter business planning horizons, together with the emergence of new, more agile corporate structures, have driven demand for flexible space, which enables companies to react to change quickly.
“While co-working and serviced office operators have grown rapidly over the past five years, driven largely by start-ups and the freelance economy, this is only the tip of the iceberg, with latent demand from global companies set to emerge over the next three years.”