_Workplace the key strategic lever in the pursuit of competitive advantage
Serviced offices started in the 1980s with a multitude of local and international providers offering traditional office set-ups under flexible leases. Co-working brands, whilst also being evident in the market almost as long, only really gained popularity after the Global Financial Crisis, following a new wave of start-ups and entrepreneurs seeking a new approach to the workplace. Since then flexible accommodation has continued to evolve, now forming a combination of the two accommodation models.
Evolving work processes, changing occupier preferences, the shifting structure of the economy and rapidly advancing technology have all contributed to this change in environment over the past decade, resulting in occupiers beginning to employ real estate as a strategic priority and enforcing the view that a workplace represents a further strategic lever in the pursuit of competitive advantage.
Attitude shift towards implied cost of real estate solutions
This is driven by a change in attitudes towards real estate costs, with focus shifting towards effective rather than cheap real estate solutions. The office market has consequently seen an increase in demand for flexible and innovative working environments with on-site amenities and an increased aesthetic value attached to the workplace.
These qualities aim to increase productivity by strengthening the interaction between people and property via a positive workplace experience, which many large companies believe is fundamental to attracting and retaining skilled people who are unlikely to relish traditional office environment.
It has been reported that since 2014, the market has more than doubled and there are now almost 18,000 flexible and co-working spaces. This highlights a respective growth of 3,500% and 8,000% around the world since the start of this decade, accommodating almost 1.7 million workers.
To put the latter into perspective, in 2017 there was 2.5 million sq ft let to the sector, resulting in the take up of flexible workspace increasing by 20-30%. This market progression is led by a significant increase in market presence in Central London, which represents around one fifth of take-up.
Despite this significant growth, the accommodation type still only represents less than 10% of office stock in all major global markets, despite 68% of businesses reporting that they currently implement a flexible workplace policy. Within the UK it is still considered a revolutionary topic as participants in the office sector have generally been slow to accept the changing business landscape and have not adapted their business models accordingly.
However, developers such as Bruntwood are continuing to drive the presence of flexible accommodation in the UK office market.
Technology driving change
The rapid growth in flexible accommodation is strongly linked with the rise of technology. Flexible office concepts were originally introduced as a response to changes in technology and the redefining of working processes by increasing the speed to market, decreasing the margin of competitive advantage and improving business productivity and efficiency.
In addition to this technology provides the ability for businesses to create an on-line presence to promote brand, services and drive revenue. These advances are driving the change in the world of work from an industrial economy to a knowledge‐based one.
In order to accommodate and benefit from the varying skillsets, the need for more flexible, collaborative workspace that improves interaction between staff is paramount. This interaction allows employees to learn from each other, something that is identified as a key driver of productivity.
The goal of improving workplace productivity is furthering the need for staff to be provided with the best tools and technology along with the right environment. It is now necessary for firms to innovate and develop strategically flexible business models in line with technological advances to survive and succeed in this technological dominated market and remain competitive in progressive marketplaces.
Productivity has been highlighted as a key occupier requirement and through enhanced productivity the right accommodation allows many occupiers to justify the increased real estate costs of flexible accommodation. It is understood office environment impacts turnover through productivity and the more productive use of available working hours.
Business growth linked to experience
Attention is now moving away from simply increasing the density of occupation and a flimsy, cosmetic approach to space design and fit-out; placing the marking in the midst of a social and economic power swing where the success of many hyper-growth businesses is increasingly being linked to experience.
Innovative working environments is linked to higher commitment and staff retention, ultimately limiting staff costs, underpinning the argument that staff should be more readily consulted in the relocation decision process in order to meet the specification needs and desires of employees.
The cost related importance of increased retention is outlined in the British Council for Offices’ recent study, which maintains that real estate costs represent no more than 15% of an organisations total operating costs.
The largest percentage of business costs to ‘people’, highlighting the most significant example as the cost of losing a member of staff can equal up to ten times more than the cost of accommodating them.
Victoria Harris is a graduate surveyor at Knight Frank in Leeds, specialising in office agency.
To find out more, visit the Flexible Office Solutions website or contact the team.