Read Citibase CEO Steve Jude’s column in Property Week: ‘Wake up – flexible working is here to stay’06/05/2016
Flexible working has officially come of age. According to recent research by Cushman & Wakefield, flexible offices now account for 8% of all newly occupied global office space – a figure that is set to rise. Meanwhile, commercial property website Commercial People reported that enquiries for flexible office space rose by almost 40% in the UK’s regions in 2015, compared with an increase of only 15% for enquiries about non-flexible space. Despite this, too many landlords are yet to embrace the flexible working trend and are reluctant to adjust. A misplaced perception remains that the growth of flexible working was spurred by the recession alone – skilled workers lost their jobs and became freelancers or entrepreneurs requiring this kind of workspace. When the market comes back, so will major occupiers. The UK economy has returned to growth, but the world of work has changed forever. Large occupiers remain elusive, particularly in regional cities where the public sector occupies far less space than it used to due to cutbacks in government spending. Research published by Northumbria University at the end of 2015 shows there is an abundance of secondary office space supply. It surveyed 27 key office locations outside central London, and based on this sample found that 20% of total office stock is vacant, and of this figure a staggering 90% is secondary space. True, the recession did encourage the growth of flexible working because businesses were forced to take a critical look at their fixed cost base, including long-term leases. But other factors also came into play. Technology has made it easier for small firms (which naturally require flexible space) to operate and compete with larger rivals, and therefore become a more significant part of the economy. According to the Federation for Small Businesses, there were a record 5.4 million private sector businesses in 2015 – 146,000 more than in 2014 – and more than 99% of these were SMEs. In addition, companies of all sizes are realising that flexible working is often more financially efficient than being tied into a traditional, long-term lease. But building owners should not fear this trend. Those who embrace it and adapt their thinking and space accordingly will reap the rewards. For example, earlier this year Citibase was commissioned to open a new business centre in Newcastle-under-Lyme. The under-used property had been sitting near empty for almost two years, with conventional marketing of the building having resulted in just two small lettings. The building owner saw the need for a shift in strategy and assigned us to reconfigure the space, market it and operate it as a business centre. Within two months, the space was almost full with SME occupiers and delivering an income for the owner. This shows the level of demand from small businesses in a regional location. Another common misconception is that SMEs seeking flexible office space are less secure, short-term occupiers. In reality, they actually tend to take space for the long term. More than 80% of the customers in our centres are what we call ‘sticky’ – they extend their initial terms, and often remain in the centre for many years. Risk is also significantly reduced because the chance of 50 SME occupiers facing financial difficulty at once is highly remote. Relying on one large occupier will often be more risky. Flexible working is clearly here to stay and will continue to grow rapidly for a wide variety of reasons. Across industries, all successful businesses adjust their strategies to meet the demands of the markets they serve – building owners must do the same. You can read Steve’s article in Property Week, by clicking here.