What Sort of Spaces Are Businesses Looking At?
Size
When looking ahead at new space, businesses don’t seem to be looking at massive changes in space requirements.
The biggest category of change is those looking to increase space by 11% to 25%. Over a third (37%) of respondents said they plan to increase their office space by this amount. Just over a fifth (21%) of respondents said they’re planning to increase their space by 26% to 50%.
Looking overall at businesses who said they’re planning to change their space in the future, those taking on new space are looking at an average increase of 24%. Those reducing space are on average looking at reductions of 22%.
How are you planning to change the amount of office space you occupy?
Quality and flexibility
While businesses don’t appear to be making substantial changes to the size of their offices, the type of space businesses are looking at is changing.
We asked businesses what type of office space they will or would move to, allowing them to choose all options that apply.
The top three most popular types of space chosen by respondents were:
1. Higher quality/Grade A
2. Serviced office/ flexible workspace
3. Space in hub where there are other similar industries, relevant research or education facilities
This demand is being reflected in current property market activity. Businesses are adapting to new ways of working, trying to entice workers back to the office, and coping with higher energy costs. They increasingly want higher grade space, better facilities and greater energy efficiencies.
Demand for Grade A space has remained high, particularly when compared to the demand for lesser quality spaces.
According to recent figures from property adviser, Carter Jonas, landlords are having to cut advertised rents on office buildings with poor energy efficiency ratings by as much as 10% to attract tenants. They comment that there’s been a structural shift in demand away from low-quality stock, emblematic of the growing division in the London office market.
Almost half (44%) of respondents who work for a company with 250 to 500 employees said they will/would move to a higher quality or Grade A office space. Over a third (36%) of those who work in a company with 10 to 49 employees said the same.
Businesses also want greater flexibility as they work out their long-term space requirements.
Leases are not dead: 30% of respondents said they will/would move to a traditional lease arrangement, but they are no longer the only option.
This shift in aspiration appears to be particularly high in Greater London, where 42% of respondents said they would look for higher quality or Grade A offices, 39% voted for flexible workspace and 36% for a hub of similar industries.
According to CBRE, flexible space will account for 20% of central London office stock by 2028, up from about 8% today. Independent research from Green Street also forecasts that flexible space will double in the capital by 2026. Given the responses to our survey, these trends look likely to continue.
It’s not surprising to see more businesses considering a flexible workplace than a traditional lease, considering the events of the last two years. A range of converging factors are making it a highly compelling option, including concerns caused by economic uncertainty, growing adoption of hybrid models, and a general desire for workplaces that act as assets rather than liabilities.
The latter is a particularly relevant point, given that the respondents are clearly still interested in higher-quality Grade A office space. The move to home working in 2020 undermined the value proposition of the traditional mediocre office. It transformed from being the place we work to an arbitrary building. With the realisation that working from home is extremely viable for most people, the expectations put on the workplace were naturally raised.
To use a cliché, four walls and a desk just aren’t enough anymore. Workplaces need to do more to outweigh the benefits of home working – people need to want to work in them. This has been reflected in the flexplace sector with a growing number of operators going above and beyond with their offering. We’re seeing better amenities, more services, and an increasing focus on community.
These are the factors that turn a workplace into an asset. The office isn’t dead – it’s just evolving to be more relevant to the wants and needs of the people who use it.
Zoe Ellis-Moore
CEO & Founder, Spaces to Places Ltd