The growing flex office space market is changing the status quo on plain vanilla office space and replacing it with a workplace experience loaded with amenities and services ranging from yoga and relaxation rooms to podcast studios and tech support.
Companies looking for flexible office space in a competitive market are finding that it is by no means “one-size-fits-all.” Some spaces are akin to walking into the lobby of a five-star hotel, while others feel more like you’ve stepped into your parent’s rec room.
“They are all coming at this from a slightly different angle. We see everything and there is really something out there to fit every requirement,” says Dom Harding, head of Workthere Americas, a subsidiary of Savills that helps occupiers find flexible office space that best fits their needs.
One of the biggest drivers behind the evolution occurring within these work environments is competition on both sides of the table. Coworking and flexible space providers are all looking to distinguish themselves and attract users in an increasingly crowded industry. At the same time, occupiers recognize that the workplace is a critical component in hiring top talent.
“The growth rate in coworking is still phenomenal and expanding at a fast clip,” says Stephen Newbold, national director of office research at Colliers International. “When there is such growth, the players in the sector have to look at different ways to widen their offerings and differentiate themselves from their competitors.”
A 2019 report on the US Flexible Workspace Industry by Colliers cited the growing “talent wars” as a key incentive for firms to utilize flexible workspace. Low unemployment is pushing companies to offer workspace amenities to attract young workers. Across the broader office industry, there is a clear trend of companies gravitating towards Class A space with amenities both inside buildings and nearby. “We always talk about location in real estate, but what we have seen generally over the last 24 months is that the need to attract talent is a key determinant in where and what kind of space firms are leasing,” adds Newbold.
Competition among space providers is creating a bit of one-upmanship in adding amenities and services that grab attention and help to differentiate their offering. Amenities run the gamut from locker rooms and bicycle parking to childcare services and an on-site barista. The evolving service offering also covers a wide range of business support and individual services. “Anecdotally, all of the providers that we have spoken to recently have mentioned the focus on a hospitality, concierge-like approach,” says Ron Zappile, vice president, occupier services, portfolio strategy consulting services at Colliers.
Some providers work with a list of preferred vendors that offer discounts or preferred rates on business services such as HR & payroll, tech support and insurance, as well as discounts on gym membership, dry cleaning and car services. Others aim to build communities for social and business networking that range from hosting guest speakers and monthly breakfast meetings to happy hours and movie nights.
The successful providers are the ones that have a clearly defined business model and target customer and are curating amenities and services around that business plan, notes Harding. Some providers tailor their offering to appeal to independent contractors, small business start-ups or bigger corporate users.
Generally, companies are looking for locations that fit their company culture, the type of space, or type of employee they are looking to attract. “Most of our clients are heavily price driven and location driven,” says Harding. That being said, the extra amenities and services can help to tip the scales when a company gets down to a short list of one or two providers, he adds.
Space options continue to evolve
As the sector continues to expand, coworking facilities will continue to morph and evolve in different directions. New models are emerging with varying levels of service and flexibility, while some providers are taking a targeted approach to carve out a specific market niche. Colliers highlighted three different “experience models” that include:
- Traditional executive suites: Separate offices are connected to a shared community area.
- Hotel curated: These providers offer extremely high-end space and services. These spaces also try to provide a consistent experience across locations, while avoiding a generic “cookie-cutter” feel.
- Mainstream coworking: These types of spaces tend to be more communal in nature and are designed to have a high worker density and design flexibility where desks and seating can be easily moved and reconfigured.
Flexible space providers are not only expanding amenities and services as a means to differentiate themselves and attract a wider base of potential customers, but they also are looking to diversify their income streams. “As the need to diversify continues, I think we’ll see service providers and landlords try to come up with bundled packages and pricing models,” adds Zappile.