Big companies are increasingly looking for offices that match the needs of their business and employees, with convenience and cost savings front of mind as working patterns change.
Flexible space, which gives businesses access to fully equipped offices without requiring a long-term commitment, has become a go-to solution.
But getting the right amount of space quickly has been proving difficult. So companies are locking in early, demanding flexible space in their lease agreements, says Michael Greene, head of Tenant Representation in Australia, JLL.
“While startups can generally plug in and play, large corporations need access to bigger, more bespoke spaces from flexspace operators, with an expectation of minimal lag time between requesting the space and settling in,” says Greene. “They’re squeezing that time gap by negotiating terms in advance.”
When Australian financial services behemoth Suncorp signed for 39,600 square metres at Mirvac’s 80 Ann Street in Brisbane, coworking space was a condition of the deal. The business jointly secured an external operator to run the space, while Suncorp pre-agreed to notice and financial terms in order to access the space at any time.
Deals like this are the new norm, says Greene.
“Businesses are leveraging their core office space so hard these days that they’re depending on flexible space - either within the building they’re in or externally - for project work, satellite space, to test out new markets, or as a bridging solution. They want to know they can ramp up or reduce their head count without it impacting work efficiency, or profits. In return, operators are rushing in to meet their needs,” says Greene.
An advancing sector
The concept of flexible workspaces is one of the biggest-ever shifts to the property industry. The sector is now estimated to make up 20 per cent of the global office leasing market, and many people believe it is just getting started, with widespread adoption by the office market ensuring its continued growth.
For companies like Suncorp, flexible space has become a core part of their portfolio strategy, says Adrian Zanetti, Executive Manager of Strategy & Portfolio Performance, Suncorp.
“We operate in a rapidly changing business environment, which moves faster than bricks and mortar can, so we need an adjunct to our real estate portfolio that allows us to move at the speed our business does,” he says.
“Being an insurance company requires us to ramp up for events. A major hailstorm might last a couple of hours, but supporting our customers after the event can run for months. As we continue to manage our space utilisation, very flexible on-demand space is essential for these types of events.”
As the demand for bigger, private spaces increases with corporate take-up, landlords of new office buildings are giving over multiple floors to flexible space, either managing themselves or leasing it to an external operator. Some are doing both.
Major leasing deals to flexible space operators, including WeWork taking 11,000 square metres from Lendlease on a 12-year lease, at 320 Pitt Street in Sydney, indicates there will be no shortage of candidates when corporates are looking to lock in their space.
But as the market crowds, businesses will be looking for a point of difference, says Greene.
“If flexible space or coworking providers can continue to demonstrate how companies are getting more from the spaces they occupy in their facilities – in innovative pricing deals, high quality fit-outs, superior connectivity, social space and hospitality - and this can be scaled, demand from large corporates will increase.”
Negotiating terms
When it comes to locking in space early, Greene suggests businesses ensure the space they are negotiating suits the nature of the work and the workers, has the ability to easily scale up and down, and, fundamentally has optimum connectivity.
“I’d be negotiating with the provider how you deal with IT and security, the style and configuration of the space and the ability to get bigger spaces. Maybe you want rooms for at least 50 people where half the team have access to sit-to-stand desks, and you want a certain rate per desk,” he says.
Beyond locking in terms early, Greene expects corporates will continue to look for creative ways to take advantage of this unstoppable market.
“Flexible office space is part of the future. It allows businesses to achieve maximum efficiency from their office core space and deal with fluctuation and change through the use of flex space.”