Why Real Estate Investors Are Focusing on Flexible Workspaces
Innovation has influenced almost every aspect of people’s daily life, so much so that it has given birth to a phenomenon that changed how most people traditionally performed their jobs. With the advancements in information technology, people can now alter and shape how they live and work. Add to that the impact of globalisation, people all over the world can directly easily interact with one another. Collaboration and teamwork have become the new buzzwords that underpin almost every undertaking. Coworking spaces, or flexible workspaces, have become a thing — more and more people finally see the value that it carries, including real estate developers and investors.
What are flexible workspaces?
Flexible workspaces are office types that allow individuals from mixed companies to rent physical office spaces according to their needs. It differs from traditional office spaces in that the businesses own or lease the area for a longer tenure for private and exclusive use only. With flexible working being adopted by more and more start-up businesses, coworking spaces’ demand has seen considerable growth. With an estimated number of around 35,000 flexible workspaces across the globe valued approximately $26 billion, these coworking spaces are now gradually picking up and becoming a trend.
According to Figari Group research, flexible workspaces have grown at an astronomically high rate of 200% over just five years. Globally, the growth in the number of coworking venues has increased by 240%, according to Future Proptech. Freelancers and start-up companies are now running to flexible working spaces for their office needs. Some even believe that coworking is already becoming the new normal.
Investors in real estate are now looking to focus on flexible office businesses as a new addition to their portfolios. This is mainly because there is a widespread belief that flexible working spaces are expected to rise continuously in the coming years. These facts and figures tell us one clear thing: investing in coworking venues can become a lucrative opportunity for those who have the capital to do so.
Different types of spaces
- Hot desks are shared coworking spaces where every available space is communal and can be occupied on a first-come, first-served basis.
- Rented desks — these are desks rented by individuals themselves or their employers.
- Private office — these are offices rented by a group of employees.
- Meeting spaces — these are areas that can be reserved by people on a per-hour basis.
Coworking spaces an be easily rented out
As opposed to regular commercial workspaces, flexible workspaces can be leased on a short-term basis. It’s more attractive to start-ups that cannot bear substantial upfront payments in renting commercial spaces for an extended period. For real estate investors, this is the x-factor that makes flexible workspaces easier to market than conventional long-term leases.
It’s a source of passive income
Leasing office spaces to anyone also allows investors and commercial real estate owners to make fair use of their underutilised office spaces. It is imperative today because 40% of desk spaces usually end up unused on any given day.
Renting flexible office spaces allows owners to maximise their profit from every inch of their commercial real estate assets. Additionally, owners also get the opportunity to diversify their income streams by providing ancillary services to the renters of flexible coworking spaces. The tenure of flexible space renters is also increasing. This means that it does not differ much from conventional leasing anymore in its promise to provide a steady stream of revenue.
It appeals to a global market
More clients coming from different international organisations are also availing flexible spaces, showing that the market can be global as well. This opens a new social microcosm — flexible workspaces are no longer just space where people can work, but a place where different cultures can intermingle. Although the demand for flexible workspaces is expected to continue, real estate investors must remain prudent in betting their money on them.
As more investors diversify their portfolios by getting into flexible workspaces, its price can only be expected to shift. The market could be oversaturated if demand does not keep up with the supply brought by an influx of investments. In the end, it spurs competition between space providers and investors. Consumer preference is not easily predictable, either. They can hold onto different aesthetic standards for the spaces and change them just whenever they feel like it.
As a real estate investor, always remember to plan especially when entering markets such as flexible working spaces because they are heavily dependent on consumer preferences. Beyond utility, considerations on space’s aesthetics also have to be factored in every asset owner’s plans.
