by Michelle Bodick
Since coworking went corporate, multinational companies don’t just dominate the coworking industry, they are also filling coworking spaces in record numbers with their own employees. In recent years, Adidas, Amex, IBM, Facebook, GSK, and Microsoft have come to rely on flexible office space. Demand from corporations increased by 21% in 2018 alone. As the way they view their office portfolios continues to change, according to new research by Instant Offices, corporations are set to become the driving force within the flexible workspace industry.
For the past five years, the flexible workplace sector has been riding the crest of a wave. Global demand has increased by 50%, even while there is increasingly more supply year after year. Instant Offices estimates the global market will incorporate more than 32,000 spaces, representing over five hundred million square feet—an increase of 15% year over year since 2013. Forty percent of demand is expected to come from corporate companies and other large firms by the end of 2019, with the average corporate tenant filling at least seven flex space desks.
There is a global shift toward corporations relying on larger and more agile workspaces with flexible lease terms. Some of the biggest flexible office space deals in 2018 were in New York and London, following the trend toward viewing the coworking model as “space as a service.” This trend suggests that landlords in the US and Asia will start to launch their own spaces or otherwise collaborate with flexible space providers, as they have been in the UK and Europe.
Forbes recently announced that the fastest growing markets in the US in 2018 were Las Vegas, Orlando and Austin—all secondary markets. Kansas, Nebraska and Oklahoma all reported growth rates of over 20% across the last year. In Europe, Manchester and Toulouse topped the UK and French markets respectively. Manchester, Lille and Frankfurt have seen supply grow by over 15%. With the cost of living in top-tier cities some being of the highest on record, companies are looking at secondary cities as a way to increase affordability for employees and cut costs for themselves.
Rates in London are projected to remain the highest in Europe (averaging £644 in 2019). Yet, despite the growth in demand, it is expected that this year a short-term oversupply of coworking and hybrid space in London will see rates contract this year. The world’s largest flexible markets, New York and Hong Kong, are likely to see the same happen.
John Duckworth, UK and EMEA MD at The Instant Group, said, “As the type of demand changes and the lifetime value of occupiers in flexible space increases, leading operators are expected to become more competitive and offer increasing discounts in key markets to gain share. Here at Instant, we forecast that in these competitive markets, operators will be willing to offer 20% or more off the advertised rates while they attempt to gain market share.”
“There is still a huge focus on the larger flexible workspace operators and their future expansion plans, but the industry remains heavily weighted towards independent and localised providers and remain the ones to watch. This is where real innovation is happening in the model. Businesses are quickly realising that flex provides a versatile and agile workspace in central locations and this growth in demand has encouraged many more traditional operators to expand rapidly.”