Sunday 15 September 2019

The world's biggest firms plan to get down with WeWork

Office experience: In London, landlords including British Land Co, Great Portland Estates Plc and the Crown Estate Ltd have begun offering flexible space in response to changing demand
Office experience: In London, landlords including British Land Co, Great Portland Estates Plc and the Crown Estate Ltd have begun offering flexible space in response to changing demand

Jack Sidders

The biggest employers on the planet see a future filled with free beer and new-age motivational posters. Their offices will need to catch up.

After WeWork Cos reinvented the office experience for freelancers and start-ups, large businesses see their use of flexible space rocketing over the next three years, according to a survey of global companies with 3.5 million employees by broker Knight Frank LLP. More than half of them expect the non-traditional space to account for at least a fifth of the total compared with about 5pc now.

"WeWork has changed the narrative around corporate real estate," said Lee Elliot, global head of occupier research at Knight Frank, who led the survey. As well as seeking more flexibility, big businesses will increasingly look for "amenity-rich environments that help their employees with the challenges of modern work".

The shift presents a major challenge to the world's biggest landlords, which have traditionally focussed on securing long-term leases to maximise the value of buildings and reduce the risk of vacancies. In London, landlords including British Land Co, Great Portland Estates Plc and the Crown Estate Ltd have begun using some of their buildings as flexible spaces in response to changing demand.

"Average central London lease lengths are now about seven-and-a-half years," Elliot said. "That's at least two or three planning cycles for most business now." He expects the share of space on flexible leases in London to rise to between 7pc and 10pc over the next few years from almost 5pc now.

As big business becomes more focused on hiring and keeping talented staff, their offices become more of tool to improve recruitment and productivity. Paying higher rents for high-quality or flexible spaces offered by co-working companies may prove cheaper than constantly replacing unhappy and unproductive staff, Knight Frank researches said. Shorter leases also allow employers to be more flexible in an age when technological change is reshaping entire industries ever more rapidly.

WeWork, backed by Softbank Group Corp., has expanded at a breakneck pace since it was founded in 2010, offering clients perks like community spaces, free beer and coffee and a global network. After starting with a focus on start-ups and entrepreneurs, it now designs offices for larger enterprises.

Big banks including Citigroup Inc, HSBC Holdings Plc and Deutsche Bank AG have begun placing some teams, often focussed on technology, in co-working or trendier office space outside their main headquarters.

(Bloomberg)

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