What lies in store for the flexible office market during the rest of 2021?

At the beginning of 2021, off the back of a very challenging 2020, Workthere revealed its predictions for the year ahead. As we approach the middle of the third quarter, a time when many companies are planning to welcome more staff back to the office after the summer break and the easing of restrictions across many European countries, we take a look at what is in store for the rest of the year and which of our predictions have been shaping the market.

The demand boom came sooner than expected

We predicted that the second half of 2021 would be a record one for companies taking flexible office space across Europe and, whilst this still holds true, the demand boom in fact came a lot sooner starting in Q2 21. This was predominantly driven by pent up demand from the previous year as well as businesses looking to add more flexibility to their portfolio as the uncertainty of new variants increased. Looking ahead we expect that September, in particular, is likely to be busier than we have ever seen previously with travel restrictions easing and more staff expected back in the office. We will also see those businesses who didn’t decide in the first half of the year start to make decisions and increase activity levels. We have already seen this happening in the UK, Poland, and the Netherlands with many other European cities the following suit.

Increased demand for regional space sees desk prices remain resilient

In our original predictions we cited that, as a result of the pandemic, city centre flex locations have a sizeable amount of availability with operators under huge pressure to realise income. As a result, we expected desk prices in large capital cities across the globe to potentially be negatively impacted in the early part of the year as operators strive to compete financially with their counterparts in order to secure new customers. Whilst in some areas this has been the case, the earlier than expected boom in the market (as noted above) has seen desk prices in city-centre locations recover at a much quicker pace. Amsterdam’s average desk prices for example have recovered 47% from last year, putting the average desk pricing only 9% down on pre-pandemic desk prices, which is a far smaller decline than we expected to see at this point. In contrast, although still an option for many businesses, the growth in demand for suburban space has not been as quick to materialise across Europe as originally anticipated with the appeal of city centre amenities growing when restrictions lifted. As this balances out and businesses work out the best way to accommodate staff, it is likely that we will see further growth in suburban areas.

On-demand co-working is here to stay

This is another trend that has been substantially accelerated since the beginning of the year with the emergence of apps such as Desana and Upflex giving users access to extensive networks of spaces, locations and flexible workspace brands. These apps allow companies to buy credits for employees that enable them to work in one of the thousands of spaces the app has listed and available, with just one

single contract and one payment platform. This model, along with WeWork’s recently launched pay-as-you-go platform, demonstrates the rapid progression that the digital world is having within the flexible office sector across Europe, and indeed the globe. Providing speed, flexibility and a greater level of choice, it is easy to see why these apps are proving popular and we expect them to continue growing at a pace not just for desk space but also expanding into meeting spaces.

It is, however, still early days and, whilst we expect the trend to expand further, it is still important to remember that the flexible office market operates within a more transient community with members moving around frequently. There is also the issue of cost with operators making less money due to selling passes from a platform that will then take a cut. The benefits need to outweigh the negatives.

Sustainability & wellness continue to top priority agendas

Sustainability and wellness is a trend that is only going to keep on growing in importance and will therefore be a staple on the predictions list as we move into the future. Occupiers are undoubtedly becoming more conscious of the sustainability credentials that their workspace holds and operators across Europe are recognising this and taking greater responsibility to ensure the flexible spaces that they are delivering are not only sustainable but also future proof. As we noted at the beginning of the year, safety aspects will have a bigger focus with air quality, in particular, a significant factor. What is defined as ‘good’ with regards to workspaces will continue to alter with a greater weighting on wellbeing and environmental factors.

Opportunities continue in the flex sector

Our final prediction from the beginning of the year looked at the diversity and variety growing in the flexible office sector with landlords continuing to enter the sector to develop their own products and other sectors such as retail and hotels looking to flex space to repurpose existing stock / create a new offer. This has most certainly continued with reports stating recently that Landsec is seeking to quadruple its Myo footprint. We have also seen traditional real estate agencies invest in the likes of WeWork and Knotel. Both new and traditional flexible office operators are looking to augment and expand their offer in order to capitalise on the growing demand for the sector, which we only expect to get stronger.

An additional trend to add to our original predictions is the continued growth of corporates turning to flex across Europe. Although this is not necessarily new, the pace at which larger institutions are taking space is gathering greater speed and relevance. This has been predominantly driven by the uncertainty generated by the pandemic with many businesses unsure as to the amount and type of workspace they may require as we move into a new normal of increased ‘hybrid working’.