Tag: market

“The growth of flexible workspaces will continue as companies demand greater agility with reduced risk”

Founded in 1999, The Instant Group rethinks workspace on behalf of its clients, injecting flexibility, reducing cost and driving enterprise performance. Instant places more than 7.000 companies a year in flexible workspace such as serviced, managed or coworking offices workspace (Instant Offices hosts more than 12,000 flexible workspace centres across the world).  The Instant Group employs 230 experts worldwide. We asked John Williams, Head of Marketing of The Instant Group, about his vision of the evolution of the international flexible social workplace market.

How is the conventional property market anticipating the rise of the demand for flexible workplaces?

John Williams, Instant Group

We are witnessing a seismic change in the flexible workspace market.

Clients are demanding more from their office space and the growth in operators is serving this increasing and changing demand. Landlords are entering the market with a variety of flexible office solutions and there will continue to be consolidation of the market where there are opportunities for growth and a shift to an outsourced office model.

There is a clear difference in terms of market maturity between the UK, a handful of digital startups friendly metropoles (Paris, Berlin or Dublin), on the one hand, and the rest of the continent, on the other hand. Does coworking only fit with dense urban environments? 

Defining the differences in flexible working is critical, as coworking only makes up a small percentage of the market. Flexible workspaces offer all types of space including dedicated private offices, hybrid space and coworking. The growth of flexible workspaces and coworking will continue as companies of all sizes adapt and demand greater agility and flexibility with reduced risk. In terms of specific location growth, there are some factors which could make other European city contenders against London; largely whether Brexit will mean businesses no longer want to retain their portfolios in the UK.  Some businesses may seek a flexible solution in a key European city, with Dublin already being the European headquarters for some of the largest tech companies such as Google, Facebook and Paypal. Whilst markets such as Paris and Amsterdam continue to go from strength to strength seeing consistent growth, attracting a range of companies into the flex market as well as seeing an increased range of operators in these cities. Whilst London continues to be the most mature European market, other key cities are beginning to really tap into flex space with an abundance of new centres and operators launching in the market.

Defining the differences in flexible working is critical, as coworking only makes up a small percentage of the market.

Is the move supported mainly by coworking “multinationals” or by independent local operators?

The three largest providers of serviced office space in London in 2017 only made up 17% of the total market with a huge number of niche providers. These smaller operators cater for unique but growing segments of the market such as specialist TMT space or women-only centres.  As we have seen in the US, the number of smaller operators, who run only one or two centres, has continued to proliferate despite the growth of the larger players and represent a large proportion of supply to the market.

The three largest providers of serviced office space in London in 2017 only made up 17% of the total market with a huge number of niche providers.

Are traditional business centers all getting in and supporting the growth in offering?

Whilst the initial response was sceptical, many traditional landlords are beginning to see the benefits of flex space within their workspace. According to the Financial Times, increased client demand for flex space is having a significant impact on UK landlords.  As business demand for greater agility grows and the size number of requirements increases to all-time highs, in fact the number of deals done across London for 20+ desk requirements is up a staggering 46% in the last year alone.

Traditional landlords are seeking a new route to cater for this demand; Instant recently complete a first of its kind with a co-lease solution with landlord, Dorrington, for a client seeking a larger desk requirement.

The number of deals done across London for 20+ desk requirements is up a staggering 46% in the last year alone.

How does pricing and amenity provision compare, and what do you expect to be the respective USP’s (Unique Selling Proposition) ?

Service, Calibre of space, Quality of physical space, Additional amenities, Gyms on site, Community aspect and network (WeWork, The Wing, etc.).   Much like many other models; the higher the calibre of the amenities, the higher the pricing. However, desk rates are continuously climbing in correlation with increased demand.  We have commissioned a number of surveys over the last 24 months with our vast occupier database. They are seeking workspaces with amenities more akin to a hotel environment with gyms, creches’ and yoga spaces to name just a few – and operators are listening. 

They [occupiers] are seeking workspaces with amenities more akin to a hotel environment with gyms, creches’ and yoga spaces to name just a few – and operators are listening.

What are, according to you, the other growth areas – and the reasons why we think they are going to expand ?

Events, meeting rooms, gyms etc, concessions (pop ups, etc)… Operators are beginning to diversify and add value to existing clients; for example WeWork has begun providing pop-ups for retailers within their locations, providing a one-stop shop for occupiers.  Other ventures include single use meeting rooms. Within the wider market, adding value with improved or innovative amenities will help operators stand out from the crowd. 

What could slow or stop the expansion dynamic ?

There are several key trends that will significantly shape the future of what is still a nascent industry. The flex market is only 30 years old, at most, but the majority of its growth has come in the past decade with supply ramping up and more operators joining the market. This rapid growth and increasing interest in flexible solutions from the more traditional side of the property sector is already creating issues that the market will have to address. As competition grows across the market and is compounded by increased cost to operators of taking space, square meters allocation per desk has fallen dramatically to ensure margins are retained. We have also witnessed consolidation of the market through a number of acquisitions. In APAC, WeWork has been acquiring a number of local operators including Naked Hub and Space Mob. There are over 5.000 centres across EMEA and we have witnessed growth of 15% in the last 12 months. A number of operators including Mindspace and WeWork have expanded their footprint in Paris, Berlin, Amsterdam, and Tel Aviv.  While there is growing demand in all markets for flex space, there are a few factors which could impact the growth of the flex market : 1) Saturation of the market with too many; 2) operators, Recession / Financial down-turn; 3) Consolidation of the market.

As competition grows across the market and is compounded by increased cost to operators of taking space, square meters allocation per desk has fallen dramatically to ensure margins are retained.

John Williams will be a speaker at the upcoming Coworking Europe 2018 conference. 

Picture : The Space – Source : Instant Offices

Business centers and coworking spaces : now two sides of the same coin ?

Eduardo Salsamendi is involved in the industry of flexible workspace since 1990. That year, he founded his first business center Klammer located in Northern Spain. 

In 2008, Eduardo Salsamendi founded the European Confederation of Business Centers Associations (EUROCBCA ), headquartered in Brussels. while being the president of the Spanish Worskpaces association  ProWorkSpaces.

We talked with Eduardo about how the evolution of the flexible workspace industry, and especially how the coworking culture is now influencing the sector.

Hi Eduardo. Could you offer us an overview of how the flexible workspace industry is doing in Spain, as we speak? 

Eduardo Salsamendi

Spain has a different workspaces ecosystem than the neighbor countries. We have a lot of smaller independents business centers that are representative of their owners’ own way of living. That said, the average size of the spaces kept steadily growing over the last 15 years. With an acceleration in the 24 months. The average size of our spaces in square meters has evolved from 600 to 900 m2 over the last five year. This figure might be misleading, though, due to the break down between the very big and very small spaces. If we have a look at cities, Madrid counts nowadays for more than 1/3 of the total flexible workspaces number in Spain, followed by Barcelona. 

According to you, what are the main challenges traditional business centers are facing now? 

The good news is that we are no more just speaking about money or space, but about the people’s needs. The flexible workspace industry now works on making people feel good while working, supporting them in the making of more efficient work. Technology changes the way we work. Users mentality changes too. 

What kind of distinction would you make, today, between a coworking space and a business center?

To us, the distinction between coworking and business centers is something more and more of the past, as flexible workspace operators today embrace elements of both worlds. At ProWorkSpaces we now define a flexible workspace operator as someone offering a combination of space, services, technology, and community. And the “traditional” kind of paid services are permanent offices, virtual offices, and spaces sold by the hour or by the day (meeting rooms, training rooms, offices, workstations…). Everyone makes his own recipe based on these ingredients.

Coworking has brought more visibility to the flexible workspace industry.

Would you say that the rise of Coworking benefited the traditional flexible workspace industry, so far?

The irruption of coworking made a revolution of the flexible workspace industry possible. Traditionally, real state players were focused on space, business centers were focused on service – Space as a Service- and Coworking operators were focused on community. In the early days, one of coworking’s biggest challenge was profitability. However, coworking quickly pivoted and incorporated elements of the “traditional” business center, usually more profitable.  Coworking has brought more visibility to the flexible workspace industry. It made flexible workspace cooler. We understood that we needed to work on communities of users. In addition, we learned that offering different environments across our spaces was an added value. Many operators include different kind of spaces and ambiances: open common spaces, more informal ones, different types of meeting rooms, workstations in an open space…  

We will continue to work on the SaaE concept (Space as an experience).

Where do you see the industry going in the coming years?

The industry will continue to change and grow very fast in the coming years. We expect different kinds of workspaces looking for their specific customers. The people in the industry love putting labels on what is a business center, what is a coworking space… but users don’t care. They look for a workspace that solves their needs where they feel comfortable. We will continue to work on the SaaE concept (Space as an experience). For me, the best reward is when a lead comes for a tour and says: “Wow, I want to work from here”. On the other hand, corporations build teams for projects. They collaborate with freelancers. The new economy includes uncertainty. The flexible workspace industry is the perfect solution for this, with flexibility and immediacy. You can know what you need today. However, you are never sure about what you will need tomorrow. We have an enormous growth horizon ahead of us as, nowadays, we still only represent a tiny portion of the whole offices market.

The people in the industry love putting labels on what is a business center, what is a coworking space… but users don’t care at all.

Picture source : Spacesworks Madrid

London: The coworking market sees signs of a price war looming

Hector Kolonas is the founder of Included.co, an online platform organising group purchases for a network of over 200 coworking communities in the world. The service helps the spaces to buy supplies and services at a discounted price, thanks to the generated volumes.

As a London-based startup, which initially started to work with the London coworking ecosystem, Hector is ideally positioned to depict the evolution of the coworking market in one of the most innovative and dynamic cities of Europe and the world. The competition is becoming fierce, as somehow confirmed the discussions which took place at the recent eOffice London Coworking Conference.

Hi Hector. The coworking offering strongly increased, during the last three years London. What are the main drivers of the growth, according to you?

Hector Kolonas, Included.co

Indeed, we enrich over 50 business communities across London, up from just 2 when we launched in the city. This is at a similar pace to the number of new spaces opening up. This growth includes serviced offices adapting space into open-plan, flexible workspaces; new coworking brands; expansion of existing coworking brands; and new takes on what coworking could look like for different niches.

There are two main drivers behind the rapid growth of coworking communities in the city, namely economic and social.

First up, rent in London is crazy expensive, as can be expected for any thriving capital city. So the notion of ‘sharing’ office expenses like rent, electricity, coffee and workspace management is a no-brainer. The increasingly flexible terms (mostly month-to-month) allow for businesses to invest in growth and their staff, instead of into sunk costs normally associated with office rentals. But that’s the same everywhere, and a reason why coworking has exploded across the globe.
What’s most interesting in London though, is how rapidly the workspaces that ‘get community right’ are growing. With the growth in popularity of entrepreneurship in the UK (and Europe) a lot of passionate and brilliant people have converged in London.

What’s most interesting in London though, is how rapidly the workspaces that ‘get community right’ are growing.

At the beginning, everyone went at it alone, hiding the lessons they’d learned as competitive advantages for their businesses. Community-focussed coworking spaces broke down these barriers and showed members that they could grow faster by sharing knowledge, experiences and contacts.
With this combination, it’s no surprise that London has begun exporting some of their coworking brands across the UK, and into Europe. It won’t be long until a few start launching in the US too.

With this combination, it’s no surprise that London has begun exporting some of their coworking brands across the UK, and into Europe

Are major brands supporting the development of the coworking market or is it fueled by the multiplication of more and more independent project?

The Sillicon Roundabout, in London, around which gravitates a number of startups focused coworking.

The two seem to be resonating in London, creating opportunities for each other.
The big brands (both in the coworking sector and from other enterprise-focussed businesses) are creating huge spaces that create a buzz in the media and promote the fundamentals of sharing workspaces on more flexible terms than traditional rentals.
The independents are either becoming large brands in their own rights or carving out perfectly built oases for specific business niches. Whilst we’ve definitely seen a few independent spaces having to shut their doors, a vast majority are working on the expansion, with 2nd, 3rd or even 4th locations opening in the coming 12 months.
Businesses are increasingly switching between the two, based on the kind of employees they want to attract; customers they serve, and the additional costs they can shrink.

How about the profile of the new tenants: mainly freelancers, startups, SME’s or corporations?

As London is a melting pot of epic proportions, there’s a space (or subset of spaces) for almost every profile. From large polished spaces for consultants, professional services and the likes; to workspaces built around reclaimed furniture in warehouses.
Some spaces limit membership to specific niches or business types, others are happy to accept any member that doesn’t create negativity in the workplace.
There is definitely a growing shift of corporations moving autonomous teams into these coworking communities, but there’s still a lot to be learned about how to integrate these teams with the other non-corporate members, in a way that isn’t detrimental to the corporation.
Wherever there are startups, there are passionate and creative people, and thus a growing number of freelancers can be found in and around the most buzzing coworking communities in the city.

Is the demand growing fast enough to absorb the growth of the coworking offering in London?

Work.Life is among the coworking brands expanding fast in London.

The growth in the flexible workspace is astronomical. We’ve literally lost count of the number of shared workspaces available or being used in London, with new coworking spaces opening almost every day or two.
We’ve been exploring when market saturation will occur and helping the operators of our partner workspaces to prepare for the coming dip in demand.
At the current rate (and according to our back-of-a-napkin calculations) there should be enough demand to sustain the current workspace growth for the next 20ish months. From their workspaces who only offer wifi and desk space will start haemorrhaging members to the community-lead spaces who’ve attained enough economies of scale and additional revenue streams to push down their membership fees.

From there workspaces who only offer wifi and desk space will start hemorrhaging members to the community-lead spaces who’ve attained enough economies of scale and additional revenue streams to push down their membership fees.

With some of the traditional commercial real estate players also exploring the coworking sector, the fight for not only tenants but brand loyalty will move from location and price to tangible value and stability.

Speaking of pushing down membership feels, some players noticed the beginning of a price war in the coworking market. Do you see this? 

Even though I’m confident that the ‘war for tenants’ will be fought on the value and community front, there is definitely signs of a price war looming in the London ecosystem.
Operating costs for coworking communities are growing due to business rate increases; the gentrification of specific burrows; and the ‘sexiness’ of coworking sneaking into rent-renewal negotiations with landlords.
This opportunity has been seized by some of the bigger players to drop prices, offering what are essentially loss-leader memberships to attract tenants and potentially starve off competing spaces. We’ve had reports of members within some space being directly targeted with unsolicited marketing about workspaces “at half of what they’re currently paying”.

We’ve had reports of members within some space being directly targeted with unsolicited marketing about workspaces “at half of what they’re currently paying”.

With more and more sales teams being hired to fuel expansion, being able to absorb losses to acquire potential long-term customers is becoming a weapon of choice.
But the line between sales and community is also being crossed more and more. With some members even reporting having received messages congratulating them on personal milestones (possibly mined from private social media channels) before offering them a free tour or discounted membership as a gift.
I should obviously note that this isn’t the whole industry though, as many coworking space managers are actually and actively collaborating behind the scenes to help each other out.

With London’s center being so dense and expensive, do you see an expansion of the coworking offering in the suburb? Are those spaces different (size, positioning…) from those located downtown?

Second Home has opened a location in Lisbon

There are actually two interesting trends here.
Firstly, great community-focussed spaces from outside Zone 1 and 2 are opening new workspaces towards the centre or on other sides of the city. By leveraging their knowledge, brand equity and operational experience they can offer more affordable or valuable workspace offerings. These workspaces can either be smaller satellite-style offices or grander whole/half buildings with new features designed specifically based on the requests/needs of their existing members.
Secondly, larger brands are diversifying their market exposure, potentially hedging against the coming market saturation and price wars. This means they’re opening locations in cities like Dublin, Manchester, Lisbon, Barcelona and others. In smaller cities, the new workspaces are normally larger due to lower rentals and operating costs. A number of local coworking brands have also raised VC funding to fuel this growth.
Whilst no brand wants to ever be seen to be ‘fleeing’ the centre, some communities are moving further outwards to keep their businesses feasible. With superb community coordinators, and when well explained, this can happen without any long-term detriment to the brand, and can sometimes even strengthen members’ relationships to the community.

You mentioned it above. Coworking spaces diversify their revenue sources. What can you say about it?

From all the communities we observe, assist and enrich, we’ve picked up on 3 different avenues for revenue diversification. These are excluding the renting out of registered addresses and meeting rooms, which can be expected in any thriving metropolitan ecosystem.
The first is sponsorship, which is arguably the most attractive, because who wouldn’t want to have ‘free money’ thrown at them? Professional service and technology brands are happy to write cheques to community coordinators, to lock in the exclusive promotion of their offering. What we’ve found is that around 75% of the time, these offerings are not what the member businesses need or even want, but the community manager’s hands are tied by the agreements with sponsoring firms.
The second is the merger of partnerships and affiliate revenue. Normally delegated to community managers, this creates a bottleneck for the operating team. Not only do they have to deal with a huge amount of non-stop inbound partnership requests, but they also need to somehow figure out if:
a) the service/product supplier is legitimate,
b) the offer will create value for their members,
c) the workspace will make enough revenue to recoup this invested time.
The third is actually where we work every single day. We handle inbound partnership requests, negotiate on behalf of 200 communities, and ensure that the workspaces get a fair apportion of generated revenue on a long-term basis. As we don’t offer any exclusivity, members will never be tied to a single provider, allowing them to discover solutions that their coworkers are using, and saving money with.
This means that the members of each space in our network get access to a growing set of solutions, and the community coordinators can focus on implementing creative ways to connect their members to the solutions. Some of our partner communities are saving their members £1,000’s in unavoidable expenses each month, driving up their own long-term revenue and building great brand loyalty at the same time.
With the price war looming, and the costs of operating increasing, it’s no wonder why so many coworking communities are becoming included too.