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Even before the global coronavirus pandemic struck, flexible space providers were facing a competitive market. As the sector continued to grow, the number and types of organisations involved was expanding rapidly. Many landlords were no longer content to watch operators capture the attention of businesses that increasingly want flexible space.
The competition for a piece of the market has arguably become even more intense now that people are working from home and occupancy levels are lower than at any time since 2008, Yardi Regional Director Justin Harley said. Under the cloud of the global pandemic, the only way to compete and prepare for the future is to use technology to reduce costs.
“Rather than panic, operators should get their back-office tech in order,” Harley said. “They need to look at their operations and say ‘how can we be more efficient?’ This could be the first time they have had time to really look at efficiency and they need to up their game because increasing competition from property owners is not going away.”
A Crowded Landscape
The UK market now has numerous examples of landlords operating their own coworking spaces, as well as an increase in management contracts aimed at helping property owners to capitalise on the growing demand for flexible space. British Land launched its flexible workspace offering Storey back in 2017, for example, and more recently in 2019 Landsec launched Myo in Victoria.
Smaller commercial office operators are also starting to get involved, such as TCN, which is creating offices aimed at creative businesses. To date TCN has refurbished 400K SF across the UK — a small amount by sector standards, but with the benefit of flexibility that comes with owning assets rather than leasing.
These entrants are “squeezing the existing operators that lease properties off landlords”, Harley said. Landlords operating a flexible space in their own property will clearly have a lower cost base than an operator that leases space. As such, they may be able to entice tenants with competitive pricing, for example.
Where an operator may have previously relied on service to be competitive, this is extremely difficult to achieve during a global pandemic when everyone’s margins are being squeezed. Right now, Harley argued, whether a business will take flexible space in a building you manage or not relies on cost alone.
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Get Your House In Order
There are significant opportunities for flexible space providers to save money by using technology to streamline the business. Historically, tech solutions in this sector focused on the front end of the business to enhance the member experience: meeting room booking, digital entry and communication, for example. Now, tech solutions can digitise many back-office functions.
“We get carried away with proptech and what it will do for members but we forget to get our own houses in order,” Harley said. “There are lots of inherent inefficiencies in operations and still a reliance on the Excel spreadsheet. People still carry out 'centre walkabouts and checks' with a piece of paper and a pencil. This is an example of the inefficiencies in the sector.”
Harley gave the process of moving out of a space as an example. In traditional property terms, a tenant would give notice, the operator would inspect the space, see what work had to be done, ask someone to do something such as paint or change the carpet, ask someone else to raise an invoice and so on, all via paperwork and emails. Using the tech solutions today, an inspector can use an app to tick off aspects during an inspection, automatically create work orders and send out a work order — saving time and therefore money.
“When margins are being pressured, you’ve got to look at ways to save money,” Harley said. “If you implement good technology, you can benefit in ways you can’t predict – the opportunity to redeploy someone to do something that will generate income, for example.”
While the millions of people currently working from home might not fill the hearts of any organisation offering flexible space with confidence, at some point the UK will emerge from the impact of the global pandemic. When that happens, having a grip on costs will be just as important in an increasingly competitive sector.
As Harley said: “Operators need to make themselves ready for people to come back, because they will.”
This feature was produced by the Bisnow Branded Content Studio in collaboration with Yardi. Bisnow news staff was not involved in the production of this content.
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