In an interview with the Social Workplace Will Kinnear discusses the flexible workspace market and GKRE’s role within it:
Flexible workspace specialist agents GKRE came onto the real estate scene in 2013 to fill a gap in the market by acting for flexible space operators. Its two directors, who have a combined 30 years of experience, realised that the majority of agents available were focusing on large office occupiers as well as traditional prop cos. GKRE responded to this lack of innovative real estate operators by carving out space for flexible operators to establish new centres and has also been involved in many of the major mergers and acquisitions that have taken place in the sector in the past few years.
Today, it is widely recognised that there is a need for specialist agencies that can support the growing flexible workspace market. Thus, we got in touch with GKRE co-founder, Will Kinnear, to find out about how these specific market needs are developing and how the real estate industry can meet these needs through locating new opportunities in the workplace industry.
Hi, Will. In your experience, why would you say property owners are coming under pressure to move away from traditional leases?
As specialist commercial agents in the sector, we think there are several key reasons for this, some financial and some driven by changes in working practices.
One of the main reasons is that businesses now want the flexibility to grow into space as and when they need it. They aren’t prepared to be tied into long- term leases with large upfront costs anymore. Flexible options also mean businesses can have high spec workspace in a good location that they couldn’t afford on a traditional lease basis.
What are some of the specific needs of today’s contemporary employers and employees that businesses have to consider?
Businesses don’t need to provide one desk per person as they used to, as new technology allows people to work in different locations. They want space that lets their staff come and go and use desk space and meeting rooms when they need them.
Flexible space meets people’s expectations about how they buy products and services nowadays. Since the explosion in e-commerce, people are used to transactions being simple and quick. Flexible space caters to this and lets them to focus on their business. This process it is so simple, it allows them to be agile and provides them the ability to move into new locations, even new countries, without any hassle.
The way people work has changed too, especially among people in their 20s and 30s, who now make up the second-largest segment of the workforce. They want a workplace with a ‘buzz’, where they can meet people, chat, eat and relax as well as work. Businesses that don’t offer this can struggle to attract and retain the staff they need.
Finally, we’ve become a nation of entrepreneurs, with 1.9m more businesses in 2015 than in 2000, many of them sole proprietors. People don’t want to work on their own in coffee shops or at home. They want to be around other people, who they can network and socialise with.
This is all good news for operators as flexible space is a highly profitable and marketable offer. Looking forward, we can only see this demand for flexibility strengthening. New accounting rules coming into force will require companies to consider the financial implication of having long-term leases and how they sit within their accounts. This will open the door to more short-term flexible options.
What are tenants options today for taking shorter-term flexible leases?
Our clients are the flexible workspace providers. We work with them to structure leases and deals in the best possible way so that they can in turn structure flexible leases for customers. With the increased sophistication of the flexible space sector, there are greater options for tenants including:
- Coworking space, which operates on either a membership or occupational licence basis.
- Short-term leases with break clauses, which allow you to join and leave easily as well as scale up or down as your business needs.
- Sub-letting space and collaborative space within the offices of like-minded companies, effectively creating hubs within existing spaces.
- Club memberships, which allow easy access to facilities and work/meeting spaces.
- Live/work space that provides a third space between home and work environments.
- As the flexible space sector expands, so the options for tenants in terms of location, style and quality of space will continue to increase.
How has the rise of social workspaces affected the real estate sector overall? What changes have to be made in order to accommodate this growing trend?
There are distinctions between the types of social workspace, like coworking, which is social but still considered an office environment. Members clubs, as well as tailored coffee shops, are set up to appeal to the laptop generation and are increasingly taking over the small business space.
In terms of coworking and serviced offices, employees demand a social environment and companies have to respond to attract and retain the best talent. As a result, the real estate sector needs to look at the rise of flexible space as a complementary part of its offering, bringing in the expertise to deliver and manage space which meets the evolving demands of tenants.
The quality of the space is key, particularly in London. For both small and large companies, flexible space offers the ability to have the advantages of a high spec fit out with all of the facilities you could get from an expensive corporate fit out on a short term arrangement.
In what ways has GKRE changed in order to adapt to this new market?
GKRE was always set up to service this new market, so we have really been at the forefront of the changes from the outset as both directors have had over the past 15 years in the sector.
As an agency, we embrace and look to lead on this change. We are working in the flexible environments that we advise our clients on. We are sensitive to the needs of all flexible workspace providers, working with operators and landlords to sell in concepts and structure deals that work. We are now also working with more and more traditional property companies who want to work with flexible workspace providers as a first choice rather than a solution to difficult to let space. In addition that, we are also working with people and companies who need information and advice on how to break into the market. It is an exciting time.
As concepts like coworking and social workplaces are becoming more ingrained in workplace culture, where do you see the future of real estate in regards to this change?
We see this as integral to real estate moving forward. Companies, no matter what size, are putting pressure on property owners, either directly or indirectly to provide a more flexible product. Traditionally, long-term leases had to be entered into as this was the norm and property owners could ultimately dictate, to an extent, the length of term. However this is no longer the case and we see that property companies will ultimately have to adapt. We are seeing that multi-let properties are increasingly having a flexible option within the building.
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