Peter Black, National Director of Workplace Strategy and Design at Colliers International participated in an interesting panel discussion about flexible working space at Charter Hall's recent in-house workplace forum held in Sydney and shares his thoughts below following on from this discussion.
1. Core space vs. flexible space
Organisations are looking to minimise the work space they rent. They are now looking at "core space" and "flexible space". Core space is defined as the minimum required for the business to function efficiently with no excess space for expansion or for specific project or seasonal work. This is the space they will rent on a longer term lease. Flexible space is space available for their use but only rented on an as-needed basis. This could be project space, gathering spaces for quarterly or monthly team meetings, meeting space that has specific high tech requirements or collaborative spaces. It could even be space that is shared with startups or small tech firms that staff are deliberately rotated through to encourage cross pollination and ideas exchange. The flexible space is located in the same building or precinct and is bookable on a daily, hourly or longer term basis. A lot of developers are including this sort of space in their buildings. In fact, a lot of occupiers won't consider a building unless it has flexible space available.
2. Real time space adjustment
Do smaller users of space, say sub 1,000 square meter users, really need or even want to permanently rent space? Or will they just use flexible space fitted out and maintained by a third party? They can reduce their financial exposure and risk by renting exactly how much space they need, adjusted in real time. So if someone leaves or only works part time, they give back the space. If someone comes on for a week or two they rent the space for only that time.
3. Shared "come home" space
Will increasing flexible working arrangements and mobile styles of working mean that some organisations will share their "core space" with other like-minded organisations? An example would be management consultants. Consultants spend most of their time with their clients and generally will have only one day a week where they "come home" for training, mentoring and maintenance of the corporate culture. If they have Friday as a "come home day" why not share the space with another organisation that has Monday as a "come home" day and pay half the rent?
What does this mean for the industry?
Taking this into account, developers and building owners will need to be significantly more flexible about lease terms, how they manage their commercial real estate and the sorts of facilities they offer occupiers. As flexible space continues to become part of the accommodation brief for occupiers, landlords will need to demonstrate how they meet the occupiers brief for core space and flexible space.
New valuation metrics will have to be developed to account for space that is occupied on a short term basis but adds value to the occupiers of longer term leases.
An increasing number of occupiers are transitioning to a business model that is technology driven and would like to see themselves as tech companies with the same agility as a start-up. Landlords can help in this transition by providing flexible spaces that are incubators or accelerator spaces with links to universities or other innovation hubs.
Make no mistake, we are in the middle of a profound shift in the way occupiers are looking at their space needs. Landlords that don’t listen to their clients or adapt do so at their own peril.
Colliers will be talking a lot more about flexible working space next year so watch this space.
*The views expressed in this article are of Peter Black and not necessarily Charter Hall's.