Success of flexible workspaces: more than short term leases?
We caught up with Enrico Sanna, co-founder and CEO of flexible workspace provider Fora, to ask about his views on the market and what makes it so successful.
How do you see the future for flexible offices market in London? Which areas outside of Central London look attractive?
I think we can at least double the size of our enterprise in London before we come anywhere close to our natural market share. So that’s definitely our next step. But we are looking beyond London as a few select cities that we believe hold the qualities we’re looking for. We recently opened an office in Reading because we liked the amount of mom-and-pops and startup companies there. We opened in September 2018 and we’re already full so, thats proven to be a promising start for us.
What are the operational business models that Fora is using with landlords?
We’re a freehold model and we believe this makes us more resilient than ones that don’t. By owning our own real estate we can fully transform our product to match our needs without having to deal with landlords.
Beyond that, we seem to be very well liked by a number of landlords and large occupiers to the extent where we have landlords approach us wanting a coworking solution in their portfolio. So it seems more beneficial for the landlords to invite us to partner rather than them attempting to build a coworking space from scratch.
What’s your view on the issue of long term leases and short term licenses for the flexible offices?
The advantages that short term leases have over longer term leases are definitely something to worry about for the guy that doesn’t have a lot of coworking sites, because it means the concentration of risk isn’t spread out.
I think the pressure being put on the longer leases here is just a natural progression of the market because the reality is, the UK market had one of the longest average office lease terms. While other European countries operated on 5-7 year leases, up until recently London primarily provided 15-20 year leases. That’s crazy. You can’t ask a company to commit for 20 years. Nobody wants to commit for that long, especially now that coworking is offering these one year at a time deals. So landlords in the space have to readjust themselves to the fact that these long leases simply aren’t possible in today’s market.
However, I don’t necessarily think the success of coworking is driven by the fact that we offer short term leases because, some traditional spaces have been offering that for the last 30 years but the flexible office boom only started 10 years ago. I think it's down to a number of other factors. I think it’s down to the natural evolution of the way people want to operate, the growing uncertainty in the market and the number of smaller companies favouring flexible office space over traditional or working from home. That being said, short term leases are great for both the landlord and tenant to change and reprice the product suitably.
Do you feel as though the sub-sector has the strength to survive the downturn?
I think the larger players will absolutely come through it. Some of the demand that smaller players attract will shift towards the big coworking brands, as they may be more reliable and more able to afford to not raise the price too high.
I also believe that there will be an increase in quality and amenities, as the flexible office providers that take shortcuts in this way will be left behind. Again, the larger players will easily afford this so won’t be as affected.
For more information and further discussion on the current UK flexible office market, Europe GRI takes place on 11-12 September in Paris and GRI Offices takes place on the 19-20 November in London.
Article by Matt Harris