To accommodate the flexibility that employees are now demanding, corporate occupiers and landlords are having to pivot their corporate real estate strategy. The traditional long-term lease is standing aside for shorter, more flexible terms, with many owners looking to include flex space options within office towers, to entice tenants and allow for expansion and contraction.
When the world went into lockdown throughout both 2020 and 2021, third-party co-working operators were perhaps hit the hardest when it came to corporate real estate. Members and users were able to exit their commitments quickly, as opposed to the long-term lease agreements in place for larger corporate occupiers.
As we rebound out of 2021 and look toward a hybrid-working 2022, traditional co-working providers will benefit from:
- Demand in more fringe locations (closer to home)
- Entrepreneurs looking for an attractive, and more social alternative to working from home after extended lockdown periods.
- Corporate landlords looking to offer tenants a flex option to allow their workforce to expand or contract as needed.
Despite the favourable market, they will also face new competition in the form of landlords and occupiers themselves, as some look to establish their own offerings.
Assets without a flex option may struggle to maintain high-occupancy rates, with occupiers prioritising flex as a key selling point in recruitment, as the war on talent rages, as well as the ability to retain staff that are reluctant to go back to a 9 to 5 work week.
Flex space however does not reflect a dying office market, with office demand in 2021, forecast to beat 2020 numbers by 77% in Asia Pacific. Going into 2022, demand is set to increase further – before returning to pre-pandemic levels in 2023. Office space is merely evolving to include flex, as well as more collaborative office fitouts that lend themselves to collaboration, innovation and problem-solving, as opposed to concentrated tasks. Obviously this is not a one-size-fits-all and dependant on company expectation, cultural differences, or non-conducive home environments, many will still choose to work full-time from the office – therefore fitouts will need to cater to diverse needs.
Flex is still an evolving trend, currently playing out across Asia Pacific’s CBDs. 2022 will determine the future landscape of office leasing, corporate real estate strategy and the war on talent – so stay tuned.
