Provider Transformation

02 TREND

Transition to partnership agreements.

Landlords are becoming more receptive to management and partnership agreements with third-party providers due to the time, capital, resourcing and expertise required to build, manage, operate and market full-service flexible office space. Marketing and branding play a more central role in attracting customers to flexible office space since consumers are often the decision-makers. Therefore, landlords can achieve important synergies and gain marketing expertise when they partner with flex-space providers.

This strategy is sometimes called an asset-light approach to flexible office space where landlords and flexible office providers share in the risk and reward. The pandemic provided the catalyst for landlords and providers to come together and strike deal terms that made sense in a quickly changing office environment.

Provider Highlights

• WeWork has adapted its growth strategy to focus on management agreements and revenue-share structures to optimize use of capital and strengthen landlord partnerships.
• IWG also is pivoting to a capital-light growth model through management agreements, franchising and joint ventures.
• The business models of Industrious and Serendipity Labs are nearly 100% management or partnership agreements today.

03 TREND

Designing the next generation of flexible office space.

While first-generation coworking remains appealing to individual consumers, it is the medium and large team requirements that will help the flexible office industry evolve and scale. In a hybrid-working arrangement, the office represents a place for collaboration that links the physical and digital world via technology. As a result, flexible office designers are challenged to develop the right mix of private and open space to meet the needs of users. Privacy may be needed for a team meeting, a Zoom call or for individually focused work, so offering the right mix of spaces is important. Medium and large team requirements also value data security, company branding and highly agile space that can be reconfigured easily. They also value access to shared amenities and specialty spaces and services, such as conference rooms and catering, that can be purchased on demand when needed. While the offerings are getting more complex, delivering them in a way that makes it easy for occupants to engage is more important than ever.

Industrious Insights:

In a survey of its members, Industrious found that workers are coming into the office primarily for two reasons: a desire to collaborate with coworkers (53%) and a desire to work without distractions (45%).

Industrious also reports an increase in demand for spaces that accommodate focus work. As a result, phone booth offerings have increased by 20% across its portfolio.

04 TREND

Continued growth of on-demand and subscription-based membership structures.

On-demand and subscription-based membership structures are highly configurable models that allow providers to flex their supply of real estate with real-time demand and manage it using technology-driven apps and dashboards. Traditional subscription-based membership structures allow users access to all spaces in the provider network for one monthly fee. Emerging on-demand membership structures allow users to access and purchase spaces by the day or hour, requiring a mobile tech interface to use efficiently. Both structures give employers more flexibility to accommodate fluctuating demand as workers return to the office.

The trend toward a more distributed workforce is placing less dependence on centralized hubs and more reliance on a larger network of spaces to get work done. While urban-core locations still play an important role, they will be only a part of a larger ecosystem of locations. Flexible office space will be one component of this ecosystem and will offer a ready-made network of locations that employees can seamlessly access through mobile technology. While not all types of employees may benefit from this model, those who are more mobile could achieve productivity gains. This model’s impact on portfolio strategy is nascent but rapidly growing.

Use Case:

Shorten commute, escape work from home, touch down point between meetings, flex office for employees in locations with no corporate office, project- and team based collaboration work, host external customer client meetings, business travel base.