Will corporates get bolder with flexible space?

March 26, 2018 / By  

The demand for flexible space originally emerged to cater to the growing cohort of SMEs, startups, freelancers, mobile workers and other participants in the ‘gig economy’. Today the scene has evolved with corporate occupiers being big users of such space, with an outlook of potentially dedicating a third of their portfolio to flexible space by 2030.

In response, flexible space providers have started to tailor their offerings to attract corporate users by leasing out larger spaces, particularly in Grade A buildings. Just last year, WeWork signed the largest single grade A office leasing deal in Shanghai by leasing an entire building of approximately 290,000 sqft (gross floor area).

Additionally, short contract commitments and individual membership structures offered by these providers allow corporates to accommodate changes in growth and headcount projections through ‘swing space’. Flexible space also allows companies to support mobile workers, such as sales teams, more efficiently and cost effectively. Corporates seem to be interested in exploring the use of flexible space as a method to enter a new market, set up satellite offices, or have ‘core and flex’ workplaces in close proximity, often within the same city.

Flexible space arrangements could also help foster innovation through increased employee interaction, exposure to new business concepts and networking with other tenants. In highly competitive talent markets, these enhancements can be significant differentiators in attracting and retaining talent, particularly with millennials. In fact, in JLL’s 2017 Human Experience research, over 60% of employees surveyed worldwide said that access to external coworking spaces has a positive or a very positive impact on their engagement and productivity at work.

Incidentally, JLL interviews with domestic and global MNCs in the Asia Pacific region reveal that corporates do not predict a large increase in demand for flexible space in the short to medium term. While many have used serviced offices in the past, the use of coworking space is still at an experimentation and pilot stage for most organizations. Some of the concerns that need to be addressed before widespread adoption include retaining brand identity and culture, protecting trade secrets and securing IT infrastructure.

It remains to be seen how corporate demand will evolve – will they be comfortable with moving into flexible space in entirety, or will they look to import the most attractive features into their own facilities? With the former, cultural factors can play a huge role. For example, corporate culture tends to be more hierarchical in Asia than in other parts of the world, with space being a reflection of status. In order to expand further across industries and age demographics, operators will perhaps need to incorporate more design features that satisfy traditional cultural preferences, particularly in relation to communication and privacy.

Please keep a look out for JLL’s upcoming report on the flexible space landscape in Asia Pacific.

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