Do you see joint venture partnerships having a place in the future of the flexible workspace industry?
Yes, definitely. There will be a place for leases, but joint venture partnerships will play a significant role in the future of the industry.
Having worked in the flexible workspace industry for almost 20 years, I’ve seen and supported a number of clients with joint ventures, notably management agreements; which is something we are increasingly seeing more of in a post-pandemic world. These partnerships are crucial for property owners in diversifying their portfolio, but also adding a quality offering that compliments their existing tenants, the local communities they operate in as well as offering in demand workspace.
This is especially the case for retail property owners. In 2020, UK high streets saw a 40% decline in footfall, a trend that began well before the pandemic. The harsh economic climate over the past couple of years has left many seeking a change of direction and craving a breath of fresh air for their assets. Flexible workspace, in conjunction with other uses may be a silver bullet for under-performing retail space, but for property owners entering the market fresh, a partnership model can be really valuable.
If joint ventures are the future, what can ensure a successful partnership?
To be honest, the key to a successful joint venture partnership is pretty simple – it’s a partnership. Grounded in mutual understanding, transparency and trust benefiting both parties; the risks and liability involved must be shared and understood between both parties from the very beginning.
Most recently, I supported a property owner entering into a new management agreement with an operator, their prior agreement hadn’t worked out because it wasn’t equitably arranged with the previous party. There are so many nuances to these relationships, and because of these subtleties you also need someone who brokers these with experience.
Ultimately, if one side walks away from a meeting smiling, while the other isn’t, then you don’t have a strong foundation for success.
The flexible workspace sector continued to grow by 4% during the pandemic, but what advice would you give to an operator looking to launch into the flex market now?
It’s crucial operators ensure that the first deal they make for space is the right deal with the right product. It doesn’t matter if you have the most creative and innovative ideas or a cutting-edge product to offer, if that initial deal isn’t right, it could cripple your business – I have seen plenty of examples of where an operator has looked to enter a market with a fixed idea of what the space should be without understanding occupier demand around them.
The right operator for the right space is my mantra. Be flexible – which is ironic in the flexible workspace sector – and think of your customers and what they are looking for in a workspace. It is not just about providing real estate to occupiers, it is about product and service which means looking at your offering from a more retail point of view and what would attract and keep your clients in your space.
What features or amenities should new flexible workspace operators be adding to their offerings post-pandemic in order to meet office workers’ changing demands?
Community is going to be key. Since the pandemic, 40% of adults have reported a decline in their mental health when working from home for long periods of time. For many, this is partly caused by a lack of human interaction.
The classic high-density offices dressed head-to-toe in corporate grey just will not cut it for employees anymore. Offices needs to be high-quality, trendy, sleek and designed to foster a sense of community with space for both quality and informal interactions. The office is no longer a space that people think they need to be in to do their job – it’s pretty clear now that we can all do that just fine from home! Any flexible workspace product needs to be somewhere that people want to go – not just offering them space, but providing that space as a service.
As the UK strives for net-zero, how important do you think sustainability will be in the flex market going forward?
Put simply: operators who aren’t looking at and thinking about sustainability will be left behind.
I think it is a positive that the growth of home working during the pandemic has given employees more decision-making power over where they are going to work. And now that employees are in the driving seat, sustainability will be a top priority. Trust me: any operator who ignores ESG won’t be a top choice for an organisation committed to its own ESG or CSR policy – or its staff.