By Cal Lee, global head of Workthere
The vast majority of flexible office space providers have responded quickly, pivoting to focus renewal & retention strategies, ensuring they are working their occupiers to assist them through this period of uncertainty and retaining a level of contract and building occupancy. Equally we will also need to see landlords working with their operators, be it on a lease or management agreement, offering similar assistance initiatives. However, the longer this continues, the harder it becomes for the serviced sector and inevitably, like other sectors affected, government support is likely to be required to keep it going as best possible.
Most businesses in flexible work space are on 12 month + contracts - Workthere’s average contract is 11.9 months. Similar to a contract for conventional or traditional office space, it is not easy to cancel a contract without a material breach by one of the parties. Therefore in most cases, it will be a question of timing as to whether they can simply cancel and acquire space again as and when they are ready.
We are already seeing highly incentivised rates for longer licence terms. Many providers are dropping their minimum contract terms and offering clients rolling contracts as well as rolling start dates to account for the requirement to work from home. So despite the current situation, there are competitive and compassionate incentives for companies under current pressure to secure space and renewing current agreements.
A further positive trend to note in the sector is an increasing spike in demand for swing space from companies where move in dates for conventional spaces are delayed or where move in dates are urgent. Where some form of office space as a temporary contingency, flexible space is able to fill these requirements with ease.
The flex market is obviously exposed in the short-term to any market impacts such as what we are witnessing with COVID-19, with risks from companies cancelling contracts as they go into survival mode. Given its flexible nature however, it is also able to react relatively quickly and adapt ensuring the needs not only of existing clients, but also new businesses are met.
We have already seen activity with regards to a rise in demand for swing space, contingency space and workplace recovery space and, as the situation evolves, we may see some acceleration in the importance of flexible space within a business’s real estate portfolio in the long term. In the short term, a real focus on teamwork between landlord, operator and customer is vital for survival.