Sharing offices in a sharing economy
09 March 2016
There is increased demand for shared/serviced offices shown by their rise up to 6th in the sector rankings of our annual Emerging Trends in Real Estate Europe 2016 survey. More companies are demanding high quality, flexible and serviced orientated office space and it’s the fast growing, often tech based companies that have been at the forefront of this growth. And the speed of change is being driven by urbanisation.
Emerging Trends also highlighted the importance of city performance and infrastructure to attract fast growth companies. In the same way that successful cities need to respond to the problem of providing affordable housing in order to thrive, they also need to solve the problem of providing affordable and quality accommodation for businesses, particularly smaller businesses. According to the City of London, 98% of businesses in the city are SMEs (< 250 employees) and 85% of businesses are classed as ‘Micro businesses’ (< 10 employees).
A desire to be close to the action, yet affordable, is driving a shift to higher density offices and residential property (the recent deregulation of micro-apartments in New York is just one example of this). Higher density is naturally driving a move towards more shared services and more communal space – a phenomenon very much in tune with the social, demographic and sustainability driven megatrends, where younger generations are increasingly comfortable with access over ownership.
Driven by the changing needs of a new demographic, and boosted by the power of technology, data and IoT, fast growth companies are demanding different services from their property providers. We’ve seen new types of office provider enter this space. WeWork for example, the New York based shared office provider is already established as the largest tenant in Manhattan. More developers are also responding and actively embracing aspects of this more flexible model. A good example is Derwent London, the company behind the development and management of the White Collar Factory in Shoreditch, who follow an approach of creating ‘villages within cities’, with campus type feel.
But Emerging Trends also highlighted polarised views on what this means for traditional landlords. Many held the view that the shared/serviced office model is a passing fad that will be the first to suffer in any downturn. Others viewed this as the start of a permanent structural change – with significant implications for how we use office space. Whichever way you look at it, Emerging Trends 2016 respondents were universal in their recognition that businesses are using space more efficiently, and that the office lease model is changing - driven by a more demanding customer, empowered by technology and access to more data on the impact of the workplace on health, wellbeing, productivity and talent management.
So where will you be working once the dust has settled? Who will you be chatting with at the coffee machine? Will 2016 be the year businesses embrace sharing office space? We would love to hear your views.
Our recent interview with Hassle CEO Alex Delpedge and her colleague Will Herrmann, revealed more about the property situation in London – Alex made the interesting point that the model for business property is pretty outmoded here in London; that start-ups often have to sign expensive five to 10-year leases which is a term they are unlikely to see out because of either failure or growth. Watch the full interview: