The Leader Magazine

MAR 2018

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Page 20 of 55

t H e le A de R MARCH 2018 21 finally seems to be happening, at pace. Our data-led market view corroborates what many are hypothesising, despite some vital misassumptions often made about the future of work. For example, recent data from the British Property Federation show that conventional leases are getting shorter, dropping to an all-time low of 5.2 years. The reality, however, is that many of them have break clauses that can be activated at a much earlier point. There is simply less demand for long leases from mid-caps, and even larger companies are looking for middle ground between serviced offices and a long-term lease. t he growth of flexible workspace The best way to understand what is driving this change in the market is to take a view of the rise of coworking and how a flexible approach to space has changed the commercial real estate (CRE) market. We know that is has grown at a phenomenal rate – 200 percent in three years then 100% in the following (past) two years, according to data from our listings site, which hosts coworking and flex space from around the world. Google Trends even underscores this finding with searches for "WeWork" alone increasing by 300 percent in the last two years. Strictly speaking, the Oxford English dictionary views coworking as, "The use of an office or other working environment by people who are self-employed or working for different employers, typically so as to share equipment, ideas, and knowledge." But the reality is slightly different – it is about bringing people together, collaborating, the creation of new business- development networks and the collision of ideas ... perhaps. Or, maybe it is simply about choosing just where you want to work, on your terms, at a cost of your choosing and in an agreement that you can back out of, at reasonable notice? In the past 12 years, the serviced-office market has grown by about 90 percent in total – a healthy amount – but coworking has evolved from just five centres in 2005 to more than 13,500 globally this year. Remarkable growth. f lex space in a sia-Pac In the key cities of the Asia-Pacific, growth in the past year has been dynamic. In Singapore, the number of centres has grown by 22 percent; in Sydney, by 19 percent; Melbourne, 27 percent; Tokyo, 20 percent; and in Hong Kong, by 19 percent. It has overridden any preconceived notions of cultural sensitivities and become a driving force in local real estate markets. The growth of coworking in China may be even more rapid, though it is difficult to quantify without being able to track how many centres are operating on the mainland. There also has been a rising trend in the Asian flexible-office industry of longer contract terms as companies see value in the offering outside of just its flexible terms. In 2017, among the deals in Asia in which The Instant Group was involved, 7 percent were for rental terms above 18 months; during a similar period in 2016, this figure was just 2.4 percent. This trend is in line with those we have seen in the more mature flex markets of the US and UK. Well-known for using flexible-office provider WeWork to house large numbers of staff in New York City and London, Microsoft recently reported it obtained 500 spaces in WeWork's Bengaluru office. In recent years, this office in southern India has seen a number of high-profile corporate customers, including, Salesforce, Amazon and Facebook. Other high-profile moves to flexible space across Asia include a 1,000-desk deal in Kuala Lumpur, and HSBC's move of 500 people into WeWork's Tower 535 in Hong Kong. Market changes behind this growth To limit the flexible working revolution to one form of occupancy is misleading. It is manifesting itself in many ways – coworking, incubators, accelerators, serviced offices, private offices in coworking centres, the use of grey space or sub- leases. But underpinning all of these different sub- sets is the overriding objective of flexibility – the ability to choose how and where your company works. It is this palpable sense of choice for clients that marks the maturation of flexible workspace from a fringe element of the sector to one actively sought out by tenants trying to support their operational business requirements. Raconteur Media partnered with Google to identify many of these trends in their highly prescient "Workplace 2020" study, conducted in 2014. The study states, "Flexible working will be the defining characteristic of the future workplace, rising from 4 percent today to 32 percent of organisations polled by 2018." It went further to say this will not be limited to small- to medium- sized enterprises but rather "among organisations with headcount of 6,000+, flexible working will increase from 10 percent today to 66 percent in 2018." The most telling suggestion of all was that the move to flexibility "will require technology investment to support the underlying organisational processes that need to be restructured or introduced to support the shift

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