Many office workers now anticipate an element of hybrid working and companies are looking to rethink their office spaces with increasing numbers considering flexible offerings.
In 2021, interest in flexible working increased significantly on pre-pandemic levels, with the market seeming to recover from the downturn during the pandemic.
Regional cities outside of London as well as London itself have the potential for huge growth in this area. There is an opportunity for investors to capitalise on new trends as people return to the office.
More landlords are now beginning to operate as flexible space operators and some investors are even opening their own-branded flexible working spaces, though this can be operationally intensive and we anticipate that more management companies will specialise in running flexible office environments.
Even those sectors that are more conservative about the use of office spaces may find that a move away from conventional offices will help encourage workers to return to the office, for example, by improving the workplace experience with more amenities and the right balance between collaborative space and personal workstations.
While many think of flexible office spaces as banks of co-working desks or "plug and play" units, in fact many offerings include private suites either with their own or shared facilities that are not dissimilar to conventional offices but give the tenant the opportunity of shorter leases in spaces already fitted out. This model is likely to offer both a more flexible lease term and potential for bespoke furnishing at a lower cost than a tenant fitting the space out themselves.
A benefit to landlords' of managing the fit out of flexible working spaces is the opportunity it gives them to improve the environmental impact and sustainability of the properties they manage, as ESG criteria can be incorporated into fitting-out process to allow for more environmentally-sustainable choices.
Whilst lenders are still hesitant to value fitted-out flexible spaces at more than their value with vacant possession, this may change as flexible offices make up more of the commercial real estate market.
Consequently, flexible spaces are predicted to take up more and more of the commercial real estate market and, in turn, make up a greater percentage of commercial property portfolios.
How we can help
We work with investors in commercial real estate, from single asset investments, to REITs with substantial property portfolios; and advise landlords on how to offer innovative office accommodation. Trowers can:
- Offer expertise on ESG investment criteria.
- Advise on borrowing or lending in the real estate markets.
- Draft or review management agreements with operators of flexible working spaces or service providers.
- Arrange introductions to specialists in the field of office re-design.
