Finding your place in the workplace
Flexible workspace has experienced explosive growth, but now a new trend is emerging. A new breed of flexible workspace providers are tailoring space to the needs of specific sectors and “niches.” These new entrants are finding unique selling points and delivering spaces designed exclusively for specific demographics, industries, professions, working parents and more.
This “nichification” has led to a growing diversification of service offerings. Through identifying a specific target market and curating a space around their needs, the niche coworking operators have succeeded in differentiating from the competition. The trend provides new opportunities and challenges for both occupiers and landlords.
Occupiers: Substance over Style
Corporate occupiers have started to lease increasingly large and long-term private spaces from the major flexible workspace operators. Conforming to the vaunted coworking aesthetic and including the free perks we’ve come to expect, these designed and/or managed spaces provide corporates with easy access to attractive workplaces to impress existing and future talent, but often within areas segregated for the corporate’s exclusive use.
For the original flexible target market – start-ups, freelancers and small businesses – the coworking community is vital, providing the opportunity to co-locate with potential partners or customers. As flexible workspaces see an influx of corporates, these smaller companies are beginning to crave something new as they compete harder to attract the best talent and participate in the entrepreneurial ecosystem. It is these early adopters who are driving demand for niche, curated spaces that provide access to a like-minded community. We’re now seeing the market respond with a huge increase in the range of space options available across a multitude of niches.
Major occupiers are unlikely to change course from leasing sizable spaces from the large flexible providers, but with an increasing range of operators available – many of which are growing in scale – it is important to evaluate these alternatives for appropriate requirements. Occupiers must be aware of the broad mix to ensure they locate their business in a space that’s right for them by matching the offer to their needs. The result may not always be the larger operators, but the best operator in each location.
Owners: Diversity Drives Return
Landlords’ attitudes towards flexible workspace continue to evolve, including embracing niche operators. The flexible workspace giants are some of the largest tenants in major cities and an important part of a landlord’s portfolio.
Investors want to diversify income streams while ensuring no overexposure to a particular sector in order to maximize and maintain value. With increasing experimentation from landlords around commercial models, small operators are often best suited to engage in innovative partnerships.
Increasingly, landlords are including a flexible space operator within developments, which allows them to offer a ladder of accommodation to businesses of different sizes. As niche operators provide a more unique offering to the ubiquitous global providers, by selecting an appropriate smaller operator, it can enhance the landlord’s proposition when targeting occupiers on a traditional lease and also support the activation and placemaking elements of a scheme.
Looking to the Future
As the number of niche operators with a compelling proposition and commercial model grows, the winners will begin to enter the mainstream market. With economic risks ahead, consolidation will likely close the gap between today’s numerous niche operators and the few major players. Mergers and acquisitions (M&A) activity is likely to increase at the smaller end of the spectrum as efficiencies are sought to enable them to compete with the larger providers. The result may be a stronger second-tier of operators that can compete with industry leaders by serving corporate occupiers and satisfying landlord covenant requirements while maintaining a more unique proposition. Alternatively, as these niche operators grow, and the giants recognize the need to “nichify,” they may be snapped up by larger operators looking to diversify their proposition.
While hyper “nichification” may be a fad, there will continue to be demand for boutique flexible workspace in the market.