Corporate Coworking — why many larger companies are exploring the benefits of flexible workspaces

The interest of large corporations in flexible workspaces is not a new phenomenon motivated by the pandemic, this interest has been around for more than a decade now. The desire of corporations to implement flexible workspaces has grown quite a lot in real estate portfolios in recent years. However, the pandemic, along with other factors, has accelerated this process exponentially.

Flexible workspaces bring flexibility to a sector that has traditionally lacked it: the corporate real estate industry has tended to work on long leases, sometimes not very well fitted spaces, and having to deal separately with suppliers (wifi, electricity, cleaning,..). This makes the process complex. 

At this point, you might be asking yourself the following question: Why has this flexible workspaces model not been adopted earlier?

The answer is complex, every operator is different and, obviously, every market has a different adoption rate. In my opinion, there are several factors that have established a relatively slow pace in the adoption of these solutions. One of the factors that I believe had the biggest impact was the perception of these spaces by the corporate world (and to some extent the general public). Seven or eight years ago coworking spaces were initially seen as a solution for freelancers and startups: maybe a little too "bohemian" an environment for a "serious" company, meaning many users did not think of coworking spaces as a good option for their teams. Business centers were more aligned to what companies understood at that time as a shared space, but in many cases, they were only perceived as an option for those people or organisations that could not afford their own office. In this environment, it was very difficult for a large corporation to opt for this type of solution, mainly because they did not view flexible workspaces as fitting their requirements, other than in very specific scenarios.

In addition to status reasons, it must also be kept in mind that all large corporations had teams dedicated not only to managing the company's real estate portfolio, but also the operations around the company's facilities. When a new requirement came along, they simply got to work and found a space that met their needs and set all their processes in place. Another key factor that has long been highlighted as an argument to keep a traditional office and not switching to flex is cost savings. It is true that in a stable environment, in which long-term forecasts are accurate enough and allow investments to be amortised over long periods of time, it may be possible to obtain, in some cases, lower costs than those offered by a flex workspace provider. However, in some scenarios, it is also possible to end up paying higher costs than in any flexible workspace, however premium it may be, and a minimum commitment of five years or even more if the investment requires it.

Gradually the world has become more complex and, at the same pace, flexible workspaces have made their way into the portfolios of these companies. Are you entering a new market and don't know how your space needs are going to change? You choose a flexible workspace, which grows or shrinks according to your needs, and you reduce the number of stakeholders involved in any management of it to one. In addition, implementation times are reduced to practically zero. Another use that the corporate world began to accept relatively early was to locate departments that do not receive external visitors to these spaces. 

These contacts with flexible workspace meant that, faced with new challenges, corporations turned to these spaces, and (especially in recent years) have been advised by brokers who increasingly include these proposals in their portfolio of options. Do you need a space for a project that is expected to last a few months or a few years? How could you even consider a conventional lease? Have your offices become too small and there is no short-term solution? Send some teams to a flexible workspace while you find a long-term solution or refurbish your space to accommodate the entire team.

1. Flexibility

Today's world is much more volatile, complex, uncertain, and ambiguous than it has been in a long time. In this changing environment, flexibility is a key asset for companies. Overnight we find ourselves working from home, for many corporations, there is still no date of return. For some the date is 2022, for others, it is after the summer of 2021. Others are still working on it, but the truth is that, although there are many very smart people working on it, no one has faced a similar situation in today's connected world.

Flexibility is a must because we don't know for sure how or where we will work in the future. In some large companies, if you follow the will of the employees, you would hardly come to the office a couple of days a month. However, for other employees, working at home is almost torture, as they have neither the right equipment nor the space to set up a proper workplace. Will the "middle ground" provide us with the answers with corporations opting for a formula of two/three days working in person and the rest remotely? The truth is that there are many different options:

• Return to previous models (remote work as an exception).

• To set the remote work: that is to say, the worker cannot choose. An example could be the staff rotations in face-to-face work that we have seen during these months of the pandemic — which have also allowed many companies to easily reduce their real estate footprint.

• Use a semi-personalized model in which work teams have the autonomy to organise their own agreed routine.

• Remote work as an option that the employee can freely choose.

• A fully distributed scheme in which the employee is given absolute freedom to work from anywhere.

Given the current situation, what large companies are looking for today is flexibility, not to make commitments that could prevent them from quickly optimising their real estate strategy when it is clearer what the new working normal will be. Will we move to a “Hub & Spoke model” in which we will see smaller central offices and several satellite offices distributed closer to where employees live?

Until the rules of the new attendance model are set there is no way to predict where these employees will live. In a distributed model, employees can be anywhere, even in another country, whereas if a model with a couple of days a week of face-to-face work is agreed upon, they may not be able to vary their place of residence or might have to choose locations relatively close by. 

2. Efficiency

Migrating to a flexible model as contractual commitments expire is something that has been happening for months and, I believe, will continue to happen in the short and medium-term. This is because it offers the flexibility necessary for companies to adapt to the medium and long-term future in an agile manner, not being tied to prolonged commitments, while eliminating CAPEX and therefore not requiring long periods to amortise the investment. On the other hand, it allows corporations to use a network of spaces, as and where employees need them, in a much more cost-efficient way.

Some operators are trying to offer their network of spaces in an attempt to become the flex space provider of a corporation, however, very few operators have a network that allows them to be an alternative at national or international level (in fact this is not a new phenomenon, as companies like IWG or WeWork already had similar agreements with multinationals that made them their default flex space (they have the commitment to use their spaces preferentially in any location) in exchange for better pricing or conditions.

Another move that I think will become important, is that these large corporations will try to minimise the number of suppliers and try to obtain this service through marketplaces to further simplify the operation and only interact with one supplier. I don't know if the critical moment has arrived for these platforms to begin to shine. All the conditions are now in place for them to be a much more attractive option than they were two years ago, and the developments of some industry stakeholders seem to prove it.

3. Office transformation

Remote work has made us rethink the purpose of offices. Pre-pandemic, many companies still saw the office as a space where employees came to work. With the pandemic, it has been demonstrated that employees can work in many other spaces with similar performance to those they had in corporate offices. Of course, there are cases in which performance is higher and others in which it is lower depending on the conditions of the worker, their digital skills, the tools that the company has made available to them, as well as the type of work they do, and the business and organisational culture of the organisation to which they belong. 

One of the trends being considered is the change in the orientation of offices, from dedicating about 70% of their surface area to individual work and the remaining 30% to group work, to reversing these percentages. It has been realised (and tested) that individual work can be done in many other spaces, however collaboration, maintaining company culture, and team building is best done when we have the team physically working together on something. 

All companies that are thinking of refurbishing their offices will value the option of moving part of their portfolio to flex to minimize those investments, not be tied to a permanence necessary to amortise that investment and gain the flexibility that the current environment requires.

4. Pay-per-use

Another factor that has long been on the table for some of those responsible for managing the real estate portfolios of large corporations was the percentage of daily space usage. The figures were far from optimal, but space costs were a fixed expense for companies. Now, however, it has been shown that remote working can work and that migration to a flexible model is possible, and all options are now being explored. Obviously at this point, they want to get maximum flexibility, optimising their costs and not paying for something they are not using.

Is this going to be possible in 100% of cases? Of course not: if they want a Serviced Office the operator will charge according to the square meters of the Serviced Office, and the client will calculate what dimensions are suitable for their remote working policy and employees that should use the space.

However, for proximity workspaces, in order to offer employees a professional work environment just a few minutes from their home, you can achieve total flexibility and opt for a pay-per-use scheme, either by reaching an agreement with a single operator or by using a marketplace to achieve a truly distributed network of spaces that reaches the entire territory.

In my opinion, these are the keys to increasing the percentage of flex spaces in corporate portfolios. There are other reasons, but if I had to choose four while trying to minimise the hype around any of the changes we are experiencing, I would definitely choose those discussed above.