From city to suburb, flex providers want to save the office

Questions over what a post-coronavirus office should look like, why it will be needed, who will occupy it and where it should be are still being debated as the UK government encourages companies back to the workplace. Ask the operators of flexible office space, and they will likely claim to have the answers – although not always the same ones. As corporate occupiers rethink how much space they need and the terms on which they need it, signing for space on flexible leases has been touted as an ideal solution. The UK’s recession could also pose an opportunity for the sector, which has tended to perform well during harder economic times when redundancies are made and people set up their own businesses. This expected demand for space has led to some bullish outlooks within the market. Legal & General is looking to double the amount of flexible space offerings in its portfolio by the end of the year, saying the sector poses a “massive opportunity” post-lockdown. Fora plans to expand into Europe and the US and almost double its footprint in London from 700,000 sq ft to 1.2m sq ft.  IWG has remained upbeat on prospects for the flex office sector throughout the pandemic. As lockdown began, chief executive Mark Dixon said that although the business would suffer a short-term hit while workers stayed at home, this would eventually be mitigated by businesses looking for temporary workspace due to office closures. Business in the ‘burbs Has this prediction come true? Dixon says so. During July, IWG saw a rise in the number of enquiries from medium-sized corporates in London looking to downsize, and large corporates are following suit. “More and more companies will seek to reduce space and work flexibly – it’s an absolute step-change,” Dixon says. “In the last month we received two large enquiries – one for 23,000 people and one for 30,000 people – working from home with drop-in [contracts].  “Getting everyone together in a big tower in Canary Wharf was the tradition. But Covid has force fed everyone a diet of working from home, and everyone has realised that actually, it isn’t too bad.” This transition to working from more local work hubs could see the flex office market boom in the suburbs, Dixon says. “There’s still a place for London, there’s still a place for the big cities, but they become places of collaboration where people come together and work on projects… Everyone else will work from home or close to home.” Others are less convinced. Yotam Alroy, co-founder of flex space provider Mindspace, is sceptical of a city centre exodus. “I don’t think there will be a crucial move outside the city,” he said. “I think the CBDs will stay CBDs, and when we get a vaccine, people will want to go back to their old habits.” Legal & General office sector lead Andrew Mercer is also unsure of whether the flex market will see a long-term suburban boom. “I’m struggling to see full-scale change to start spreading the workforce across the country… It doesn’t help the culture, brand or community feel,” he says. “You can’t get that ‘water cooler’ moment. For some, that may work, but for the majority, I expect that they will come to the conclusion that they do need a central hub.” Nonetheless, in the shorter term, Mercer acknowledges that workspace away from city centres will have its benefits. “While Covid continues for another year before we get a vaccine, maybe for that period companies may say we don’t want staff to get on public transport – and will go so far to do a deal with Mark Dixon to get an office in local towns.” Build it and they will consider coming But as the pandemic continues, anecdotal evidence suggests that some flex and co-working companies may struggle to bring occupiers back. A start-up founder who returned to the company’s WeWork office in Birmingham last week said the building was largely empty. “There were two or three people working there,” they say, adding that they may reconsider whether to keep the space or now run the business remotely . “I’ve seen a lot of the hype around flex space, and I don’t believe it for a second,” they add. WeWork declined to comment. Workspace Group head of asset management John Robson says the company has noticed this trend. Some tenants have decided not to renew contracts and rather extend the working-from-home model in place during lockdown. “We’re going through a tough time at the moment so some of our customers will leave,” Robson says. But Robson expects these companies to be replaced by new customers and that the comings and goings will “balance out over time”. “Sometime, hopefully in the new year, we should see a bit more of a bounce back,” he adds.   Before Covid, the company received about 1,000 enquiries for new space per month. In April, this dived to around 270, but in June the company fielded 765 requests to look at space. “We are continuing to see that upward trend and a return to what I would call normality,” Robson says. “That’s good forward momentum.” To send feedback, e-mail lucy.alderson@egi.co.uk or tweet @LucyAJourno or @estatesgazette Photo © Mint Images/REX/Shutterstock