How businesses should prepare for changes in the commercial real estate sector

Wybo Wijnbergen, Co-founder and CEO, infinitSpace

The Covid-19 pandemic had an immediate and widespread impact on the commercial real estate (CRE) sector. It took just a matter of days for offices, retail outlets and hospitality venues to close their doors in March 2020 as national lockdowns were implemented. Many commercial landlords were served lease termination notices as businesses shifted to a remote-first model, unsure of when they would be able to return to the workplace. Yet the sector proved its resilience: in Q1 2021, Savills reported that £10.5 billion was invested into UK commercial property, a figure that is 112% above the total turnover recorded just nine months prior in Q2 2020. On reflection, much has changed over the past 18 months. While some businesses were already aware of the benefits of a more flexible working model – not least its positive impact on employee satisfaction and productivity – the pandemic has catalysed this trend. In fact, 30% of workers today say they would prefer the option to choose when and where they work over a pay rise. This has implications on those providing and managing office spaces across Europe: the trends that have emerged in this time will dictate what the future holds for the industry. Here are just a few examples of what commercial landlords and businesses renting office spaces can expect in the coming years… What to expect in the next five years

The rise of flexible workspace operators over the past decade tells us that the model is nothing new, and certainly not a result of the pandemic. The difference now is that hybrid models have become firmly established as the new normal. As businesses establish their own working patterns, the design, build, functionality, management and marketability of a commercial building will be driven by the growing demand for flexible working. The workspaces of tomorrow will be focussed on providing an enjoyable experience, rather than simply providing a basic office setup consisting of a desk, chair and a communal kitchen area. Offices will become hubs that bring people together on those days that they choose to venture into the workplace, offering perks that employees won’t find at home – whether that is collaborative spaces or after-hours fitness classes and wellbeing workshops. Many enterprise tenants will no longer be satisfied with the traditional workplace set-up. The design of a building; the technology that governs the use of the space; the sense of community; the meeting rooms; and the additional networking opportunities – these will all be critical. Positively, businesses in the UK are already preparing for this eventuality. A recent Knight Frank study of UK businesses found that 81% believe they need to implement a new workplace strategy post-pandemic, and just shy of half (47%) envisage their real estate strategies to include a Wybo Wijnbergen

Wybo Wijnbergen is the Co-founder and CEO of infinitSpace, a company that enables commercial landlords to easily create and run a flexible office space under their brand and conditions. Prior to launching infinitSpace, Wybo was a Managing Director at WeWork, where he helped oversee the company’s expansion across Western Europe.

greater amount of flexible, serviced or coworking space. With that in mind, there is another trend that will unravel post-pandemic: the growing number of flexible workspaces available on the market will no longer be dominated by existing operators like WeWork and The Office Group. Instead, we will increasingly see commercial landlords converting traditional office buildings into flexible workspaces that meet the needs of today’s businesses and their employees, whether by forging ties with flex space operators or going it alone. Right now, for instance, around 6.9% of total office stock in central London

consists of flexible working spaces. JLL predicts that this figure will rise to 30% by 2030. Similar trends will be seen across Europe.

Tech will play a starring role in the workplace of the future

Technology has had an irreversible impact on most industries, particularly since the onset of the pandemic. It should come as no surprise that the workplace of the future will be built around great tech, too. A survey of CRE senior executives during the summer of 2020 by Deloitte found that less than 50% considered digital tenant experience a core competency of their organisation. Yet digitising operating models will become an important differentiator of successful workspaces in the future. As employees demand more from the office experience, businesses and landlords must embrace the flexible working revolution and deliver exceptional facilities – or risk losing out to their competition. The first port of call will naturally be to fit-out existing office spaces to meet the expectations of long-term tenants; for businesses, this will mean seeking out flexible workspace providers that have taken the design and functionality of a space into careful consideration to ensure that employees’ needs are being met. The services on offer within the building itself will also determine which workspaces businesses choose to rent, and spaces that inspire productivity, collaboration, community and wellbeing will sit high on the list of priorities. Underpinning all this is the importance of having technology in place that helps tenants to utilise the space effectively. The experience of an entire building can be improved through an app, for example, which enables users to locate meeting rooms, check availability, browse events, and, while the pandemic continues, avoid crowded areas. More than that though, tech will support the ongoing evolution of workspace. Through apps and other platforms, data can be collected that allows both businesses and landlords to continuously alter spaces based on users’ preferences. By analysing people’s movements and behaviours, landlords will get a clearer idea of what end-users (namely, employees) want from their office space, and set about making the necessary changes to suit tenants. The proliferation of technology will also give control back to landlords who would prefer to manage their own spaces, under their own brands, rather than relying on large operators. Over the coming years, businesses will enjoy unique office spaces managed by smaller-scale providers. Generic workplaces with standardised facilities will not need to become the de facto model, as landlords leverage technology that can not only do the heavy lifting when it comes to optimising building space – but that also allows them to curate a unique experience for tenants. A major shift has taken place since the start of the Covid-19 crisis, which will determine the fate of the CRE sector. It has not all been bad, however. In fact, a plethora of new opportunities have been created for businesses, and the landlords servicing them, to re-think how they can use space to deliver a positive experience to those within it: whether that is once a week, or on a full-time basis.