THE RIGHT MOVES
It's almost counter-intuitive during the pandemic, but agents are reporting a strong pick-up in enquiries from tenants seeking "flexible office space", as the return to working from office buildings continues.
Whether this is a short-term phenomenon associated with the Covid-19 restrictions, or whether it signals a return to the pre-lockdown demand, only time will tell. But with over one million square feet of space in Dublin alone already taken up by this sector, its prospects are being closely watched.
"Flexible offices" are provided by specialist operators like WeWork, Regus and Iconic, who lease office buildings and then offer smaller, serviced units on flexible terms. The offer ranges from "hot-desking" to combinations of desks and private offices, up to entire floors of buildings. This market particularly suits fast-growing companies who don't want to commit to long leases, and also provides short-term overflow space. The flexibility of the workspace is also seen as important in attracting and retaining staff.
Such is the renewal in demand in Asia and Europe over the last month, that CBRE has opened a specialised service called CBRE Flex in Ireland, to help tenants find their ideal space. I chatted with Megan Burke, associate director, to find out more.
According to Ms Burke, the providers in the sector have done everything possible in terms of social distancing and sanitary arrangements in buildings. Not surprisingly, the traditional 'hot-desking model', where multiple people share unallocated desks, "is not really an option at the moment".
Generally, however, the requirement now for increased distances between desks has reduced the capacity of buildings and as staff begin returning, occupiers are realising that they don't have enough space. CBRE Flex is seeing this type of enquiry from accountants to tech-firms, and at the height of the lockdown Megan Burke arranged a deal for 25 extra desks for a call-centre operator, who could not accommodate all their staff.
Desks and space are provided under licence and Ms Burke told me that the average cost is €750 per desk, per month. This rate includes fully-fitted office space, hi-speed internet and telecoms, reception service, rates and service charge.
The cost can increase to approximately €1,000 per month where extra services like on-site gyms, coffee shops and food are provided.
The minimum term is usually three months, or can be up to four years and nine months, and big advantages for the tenant are that they have no up-front fit-out costs and can terminate at one months' notice.
CBRE Flex joins some other agents offering this specialised service and it will search the market, advise the tenant of options and then negotiate the deal on behalf of the tenant. Interestingly, whilst the agent is representing the tenant, in this sector, the agent is paid an "introductory fee" by the landlord, which mirrors standard practice in the US, but is not the traditional practice here.
The advantage to the tenant is that they are not, at least directly, paying an upfront fee, but the tenant should be made aware of the situation at the outset.
Once that is done, I see no problem in relying on the professional integrity of the agent to negotiate the best possible deal.
Megan Burke, whose own team has returned to the office on a "week-on, week-off" rota, says there has been a shift in the mindset of office workers, who now put more emphasis on flexible working hours, wellness and hi-tech environments.