Industry Insights: The Changing Trends in Office Spaces – A Focus on Flexibility & Smart Buildings

Published February 25, 2020

Our latest podcast focuses on the changing trends in office space, where we discuss the increased demand for flexible workspace, creating physical space to meet demands, and monetising on this additional investment.

Speakers

Steve Wright – Director at Fiera Real Estate
Gavin Bridge – Executive Director at Cubex
Rupert Dean – Co-Founder and CEO of x+why
John Vaughan – Co-Founder of the Instant Group

Any views or opinions represented in this podcast are personal and belong solely to the podcast participants and do not represent those of the institutions or organisations that the participants may or may not be associated with in a professional or personal capacity, unless explicitly stated.

Transcript

Jonathan Hart: Welcome to Industry Insights, a brand new series of podcasts from UK real estate investment management firm, Fiera Real Estate. Over the past 27 years, Fiera Real Estate has created a unique, vertically integrated business model that allows investors to access some of the best deal flow through its ownership stakes in 10 property companies across the UK.

We are the European real estate arm of Fiera Capital Corporation, a leading multi-product investment management firm with more than $124 billion worth of assets under management. We’ve created a new series of podcasts, which focus on the key themes in the current real estate investment market. In each episode, we’ll be joined by guest industry speakers who are experts in their area.

Our latest podcast focuses on the changing trends in office space, where we’ll be discussing the increased demand for flexible workspace, creating physical space to meet demands, and monetizing on this additional investment.

Time to introduce our panel of experts. Steve Wright is a director at Fiera Real Estate. He joined the company in 2006. Steve is on the senior management team and oversees assets within the value-add risk profile business plans, including land promotion, planning, and development. Hello there.

Steve: Good afternoon.

Jonathan Hart: Gavin Bridge is a director at Cubex, a residential, commercial, and mixed-use property developer working across the South, Southwest, and South Wales. He’s recently been named the Southwest Most Influential Figure in Property for 2019. Congratulations, Gavin.

Gavin: Thank you very much. Glad to be here.

Jonathan Hart: John Vaughan is co-founder of the Instant Group. John developed its managed offering through his work with client and landlord partners and recently established Instant’s co-lease business. Hi there, John.

John: Hi. Good to be here.

Jonathan Hart: Rupert Dean is co-founder and CEO of x+why, which works with landlords to design, manage, and operate flexible workspaces and build communities of more responsible businesses. Hi there, Rupert.

Rupert: Hi. Thanks for having me.

Jonathan Hart: Thanks to everyone for joining us today. Rupert, could I start with you? Demand for flexible workspace has become a lot more prevalent, whether the physical accommodation itself or the contractual arrangements by which an occupier takes this space. Why do you think that is?

Rupert: If you’re looking for new office space, you are faced with two choices, and they’re pretty stark. One is a conventional lease, where you’re entering into a long-term commitment with a whopping great big deposit or parent company guarantee. You’re having to then design your own space, pay for the CapEx on that, as well as all the operational costs and organization around the facilities management and asset management. That’s quite a daunting and long-term prospect.

The alternative now is much more flexible. You can now instantly turn up and enter into well-designed, well-apportioned space with immediate connectivity and data. You’re going to require to take the space that you actually need rather than the space that you feel you’re going to grow into over time. You’re only paying for what you need to take today.

From a flexibility perspective, it’s much better. Potentially, from a cost perspective, it’s better because you have a very clear one-off price without the cost of all the capital expenditure. You have a well-designed space and you now have a space for your employees that they’re going to be satisfied in. This is becoming the big thing now is the requirement to satisfy your employees and what they’re looking for.

No longer is it about the trappings of opulent space with a place where you can eat and a place where you can probably stay and sleep the night. It’s now about actually a well-designed space where people can go be productive, meet other people, and feel like they can enjoy themselves and be themselves.

Then on top of that, you’ve got the changing workforce. You’ve got the increase of freelancers that are coming through. People who actually are only contracted to work on certain projects, that’s increasing. The requirement for larger, long-term employment force is reducing. You’ve then got the role of technology, which allows for people to remote-work more, so they can work from home more. You are, therefore, not requiring as much space as you need.

Jonathan Hart: You mentioned remote working. Gavin, connectivity is extremely important, isn’t it?

Gavin: It is and we’re seeing buildings becoming far more intelligent, office buildings particularly, than they have been historically. If we’re to compare a building we’re developing today with a building we developed 10 years ago, they are quite different. The journey that we’ve been on, is trying to make our office building smarter. We’ve now engaged with a smart buildings consultant to make our office buildings a lot more intelligent, so they’re a lot more interactive with occupiers.

The phrase that we’ve adopted is this, “Building as a butler,” where the occupier has far more interaction with the building. The building will sense when you arrive in the morning, and rather than having passes, it’ll work from an app off your phone. That will bring the lift down to your floor, take you up to your office space, the lighting and heating will then react to suit your particular requirements. Also, if you’re inviting guests to your office building, they will be automatically invited, parking spaces for cycle parking or cars will be allocated, and so on and so forth.

It’s really making the building a lot more interactive. People often have more technology in their homes than they have in their office buildings now and we’re seeing that trend.

Another trend, as well as smart buildings, we’re seeing a lot more recognition of the benefits of wellness, of wellbeing, and how healthy office buildings are. There’s a phrase that we’ll start seeing more of, biophilia, where it’s connecting officers with the natural environments as well. We’re now seeing that trend continue as a lot more occupiers are aware of these sort of topics.

Jonathan Hart: John, in your business, there needs to be a certain amount of flexibility, isn’t there? People need to adapt to growth. Gavin mentioned wellness as well. There are many different factors that you have to actually take into account, aren’t there?

John: There are. On your point about flexibility, that’s one of the driving forces behind the whole flexible workspace movement that we’re seeing today. It’s no surprise that the UK is the world’s largest flexible workspace country because of the polarity that exists between the traditional leased model that we’ve seen for hundreds of years here and the onset of the flexible workspace providers who are looking at this, looking at how businesses evolve and change their workforce. Looking at their needs for having workforces in different places rather than all under one roof in a headquarters building. That is what has driven the flexible workspace evolution that we’re seeing today.

Jonathan Hart: There’s still a fair amount of inflexibility, though, in the traditional leased models. Would you agree there’s more work to do, Steve? What sort of proportion are we talking about? Gavin mentioned this 21st-century environment a lot of spaces have adapted to, how far away are we from more than, say, half of business spaces getting to that point?

Steve: I think even in the last three to five years, there’s been a massive change in the industry over that period. I think a lot of occupiers, they’re starting to change their models now. Rather than having fixed leases for 25 years in a certain building, and if they have surplus space within that building, they’ll just have an empty floor. There’s a more, now, of a model where they may have a mixed tenure of space that they’ve taken. They may have a core estate, which is the 20-year lease, but they may have short-term leases as well or even their flexible space they can up and flow into.

The way that occupiers are actually taking their space is changing, but also the space they’re offering is changing as well. It’s been picked already on some of the comments. About 10 years ago, you would have to go to your office to work, to meet all your colleagues, to actually work as well, whether you’re sending letters, or emails, or such like. Whereas now, you can pretty much work wherever you want to work, so the office environment itself is needing to appeal.

Whether that’s for the corporates taking on staff and employees and attracts them to work for their business, or whether it’s even just attracting them to come into work in the morning. Because the office environment now is changing, it’s going to be a more informal arrangement, maybe more breakout areas, more flexible space within that space. But effectively, the office has to encourage the employees to make the journey in from their homes to come to work because if they have that flexible arrangement where they can work from home, then why bother spending that time commuting?

Gavin: In addition to that, Steve, I think we’re seeing a trend where, particularly in professional services sector, where a partner or a director of that firm might not necessarily be based in one office, but they’re working around two or three offices. They need to be flexible when they get into that work environment, don’t they?

Jonathan Hart: Yes. On the one hand, yes, remote working has really taken off in the last three to five years, as you mentioned, maybe 10 years, but we need to remember that the workplace is a face to face environment.

Gavin: Yes. My business is based in Bristol, and there are a lot of tech and media companies based in Bristol. Just to reinforce the point you’ve made there about future-proofing one’s business growth. It’s very difficult for a tech firm, who might be five this year, who could be 50 next year and then 300 the year after. We have seen businesses that have grown exponential like that, and then to commit to 3,000 square feet on lease for 10 years, it’s just bonkers to them, really. They need that flexibility built in to their business plan.

John: Let’s put some perspective around this. The flexible office sector or the co-working as a lot of people like to coin the phrase and have in recent years, has evolved at such speed that what we were seeing as the one or two people start-up businesses five years ago, 10 years ago, it is now totally mainstream for people to be taking serviced offices, co-working managed offices or any hybrid of those two.

We at the Instant Group represent all requirements from the one man startup right through to the large multinational corporates, who are looking at this not just from a flexibility point of view, but from a solution which allows them to buy something which is fully wrapped as a service. They don’t have to go down all the same routes as they previously did, through procurement and management. It provides them with huge amounts of choice and choice of location, but choices of product and that is where we’re seeing this going, but I think it’s often acknowledged as a small part of the market which only is appealing to the startup business that really is very, very different.

Steve: John, it’s almost that- I think there’s a recognition now that for occupiers that the office that– Obviously, we’re talking about offices today, but be any asset class, but the office is just the fabric for which they’ve run their business from and they don’t want to waste a huge amount of time dealing with the procurement of that or worrying about locking into a long term lease, or always be not taking a long term lease, they just want to concentrate on doing their day job, and their business and they’re happy to pay a premium if that’s what it means, because they need the best products to drive their business.

Jonathan Hart: You mentioned buildings need to adapt. Gavin, can I ask you, how do buildings need to adapt? How are they going to cater for all these various demands that you’ve been talking about?

Gavin: Enlightened developers and enlightened funders hopefully. One of the trends that we’ve seen in more recent years is the way that offices are being occupied more intensively than they have in the past. The British Council Offices that does some research in this area have suggested that occupancy levels are between one person per eight square meters, one person per 12. We’re designing at the lower end, so one per eight. We’re seeing a lot of offices occupied at one per six, which means that people are making their floor space- using it a lot more intensity than they have historically.

Jonathan Hart: Is that because of demand or because the landlords are squeezing as much value out of their buildings?

Gavin: No, I think it’s about occupiers focusing on this. I think that we’ve seen where businesses have expanded in headcount and moved to new offices but have actually taken less floor space than they did in their old offices. Maybe they’re trading up, getting a better location.

Also, seeing the use of technology now. One of the things we’ve been putting into our buildings is the ability to plot heat maps of how the floor space and offices are used so that an occupier can see whether the meeting room in the corner’s not being used very much, then they can then replan the space, maybe put more desks in there, or certain areas of the building are used a lot more intensibly. Why is that? A lot more knowledge and data collection about how they use their workspace.

Steve: That’s the point, Gavin, on the BCO’s guidance whether it’s one to eight square meters or one to 12. It may be that as a landlord in a developer, you have to design your buildings to deal with that density in those locations. I say in those locations, it may actually be on part of the floor, because it may be that occupiers to say, “Well, we’re going to use, we’re going to have–” A quarter of the space can be really densely occupied, and actually we may drop down to one to six, but that will be whether it’s call centre type densities or not, but then in other parts we can have nice breakout areas, and we can have- are more collaborative.

When you’re using that space, it’s not necessarily all of it’s going to be really highly densely used. There’s making sure the buildings are flexible enough that an occupier can choose which space they want to use.

John: Density is a really good point to touch on for a minute because what’s changed dramatically is that serviced office operators are understanding the importance of amenity spaces; spaces like meeting rooms, bookable meeting rooms, or overflow spaces or quiet pods to work in. That allows the occupier to occupy their space in a much more dense and therefore, cost-effective position rather than having to build all of those meeting rooms and breakout areas within their own spaces.

That’s happening in the serviced office sector. What is interesting is it’s slower evolution into the more traditional leased sector, where landlords are leasing their space and have traditionally, on a floor by floor basis, and allowed the customer or the tenant to do it all themselves. That’s a big change that’s emerging.

Jonathan Hart: Rupert.

Rupert: Yes, that’s exactly right. If you look back at the evolution from the ’80s to the ’90s where you consider people and executives had large mahogany desks, and co-working or open plan working was actually pretty rare. All the way down to, this is a tiny bit geeky I suppose, but all the way down from, you probably had 1,800 by 800 mil desks, and now you’re down to, if it’s WeWork 1,000 by 500, all open plan. I think technology plays a big part as well because you don’t need the storage, it’s paper-free more than anything else or more these days, as a result of technology but also as a result of people’s consideration, I suppose, for the planet. Also don’t need a server room anymore. for example.

The amount of efficiency of space you get, whether it’s the size of your desk, the open plan nature of your workforce or the space that you’re saving yourself through technology or being paper-free, it’s just completely changing, and has changed, and had been a big force.

Jonathan Hart: Steve, if I could turn to you. How should landlords and developers monetize this additional investment?

Steve: We’ve had to experience this first hand with the Aurora project, which Cubix developed for us down in Bristol recently, where back in the day, as a funder, you’d have your development appraisal, you’d look what rents you think you’ll achieve, what yield you thing you’ll achieve, and then you’ll have your build costs and your build costs, ultimately, you’d be focused on those, get them as low as possible because obviously, the difference between your capitalised rents and yield and your cost is going to be the profit and I’m afraid to say, that’s generally what the funds want to achieve at the end of the day.

But I think there’s a difference now between looking at the build cot and calling it cost. I think we very much say now that build cost is actually investment, and actually, we’ve proactively chosen to invest more in our buildings to deliver a better product. The difficulties we have, which is very much the point of the question is, well, why do this? Where’s the benefit on investing more in your buildings?

As I mentioned with the Aurora, that we tried to look a bit more by focusing for the occupier on exactly what does it mean, whether it’s our investment in the wellness that the building gives to the employees and the stakeholders within the building. Whether it’s through the green credentials of the building itself, but ultimately for an occupier, it’s all about the productivity and the efficiency of their space.

It goes back to the comments in the previous question, where if you design the space as very flexible, you integrate into it some smart technology, so wayfinding through the building is superior. You don’t need as many people manning the reception for instance, or it may be that you can make sure that you’re monitoring how the building is being run, so you can practically maintain the lifts for instance, rather than waiting for a lift to go out of action, having to have an emergency call out.

But eventually, you can look through it, you can say, “Actually, for an occupier, they should be able to afford to pay a higher rent.” Ultimately, the rent and yield is what it comes down to, because fundamentally, that overall occupational costs and their productivity benefit for the people that are using that space is far superior. Although the rent is higher, but actually, overall occupational costs are probably aren’t as high, and actually, the benefit to both recruiting employees and also those employees while they’re there is superior.

The other thing which is worth mentioning more on, John, in your area about, “Why should landlords look at having a serviced office operator in their space?” I think as an industry, we do need to look at more the RICS guidance on this point because while lots of landlords are actually saying, “We don’t want to have a single tenant in a 20-year lease in this building.” Becasue they know that from the start, the value’s probably going to be going in a downward direction, all things being equal, because the lease length is eroding.

Actually, having a serviced office operator who’s got a highly diversified underlying income stream from occupiers which is inflation-hedged, because you’re renewing leases as you go, is actually highly attractive. But as an industry, we need to really get our heads around the guidance on the valuation aspects of that.

Jonathan Hart: John.

John: To add to that, how do landlords or developers monetize that in additional investment? For me, it’s very simple. They need to embrace what the serviced office operators now have been doing for many, many years, which is actually to reposition those property assets in a different way and to provide them with services, with fit out, with all of the design criteria that we’ve just been talking about that actually make them more appealing to the demand that we, as a business, as an aggregator, are seeing. That demand is ever increasing.

It’s no surprise that the serviced office operators made up 30% of all take up in the UK last year, but it’s still a very small proportion of the UK’s real estate property assets. 6% in London is flexible, and 7% across the UK, of all office properties. That’s still a drop in the ocean. For me, there is a huge opportunity for landlords to embrace, but they need to change their models.

There are complications that come around that, such as the valuation that you’ve talked about. I would just point out, it’s an insight paper by the RICS rather than a guidance because they don’t want to be seen as guiding anyone at the moment because they can’t. It is definitely casting the light on this need to evaluate the services element of property valuations in a different way.

Jonathan Hart: Rupert, you work with landlords to design, and manage, and operate flexible work spaces. What about design? Where are we at the moment with the quality of design?

Rupert: I do think there’s much more that designers could actually do by making a building out of reused flipflops. It seems to me that there’s always something. It’s got to the point of the green credentials are now increasing. The WELL certification, the BREEAM certification, these are the redevelopment rather than the building up of a building. I think these are becoming increasingly important from a landlord’s perspective, possibly from a valuation perspective, but increasingly, from a tenant perspective.

Certainly with the choice that people get now, all things being equal, certainly with the next generation of management that we see at x+why, people are much more interested in the green nature of those buildings and the utilities and the outputs that it’s produced.

Design-wise, it’s changed probably the most significantly in terms of where people go at certain points. There’s a central co-working space where people can go. There’s quiet areas, there’s library areas, there’s a range of meeting rooms, the technology in terms of the VOIP, the data. It’s all changed. It’s all according to, as John said earlier, some of the feedback that people get.

Jonathan Hart: That’s the customer. Gavin, what about the way that a workspace is marketed. Where are we at the moment?

Gavin: Well, it’s interesting because through this podcast, we’ve been talking about members, and we’ve been talking about customers, and we haven’t really thought about tenants. I think that’s an old expression. I think that for me, what flexible working and flexible space providers have really done is really put a focus on the customer journey, to use that phrase again, and that’s where we have really focused on.

The headlines for us in our corporate office space that we develop out, we always want to achieve the highest sustainability credential we can. BREEAM Outstanding that we got for a Wired score, which talks about digital connectivity in buildings and is a benchmark how occupiers can assess our buildings against our competitors. We use something called cycle score, which is the facilities for cyclists coming to the office space as well. Wellness is what we’ve now taken up as a standard as well for health and well-being in offices.

Those are really helpful benchmarks that we invest in, and the healthy discussion between a developer and a fund and about investing in that. We have seen over the years the returns in that. Those standards are really appealing to occupiers, and actually appealing to underlying investors as well. We only see that trend continuing. I think the big message coming down the road is about zero carbon and we’d be interested in seeing how that affects the BREEAM ratings.

Jonathan Hart: John.

John: On marketing, if you are marketing your product, and this goes for the landlords as much as it does the operators of serviced space, there’s a huge shift in the market changing. We have been previously used to the traditional agents, marketing space on behalf of landlords on a basis which paid them a fee, whatever, whoever, come what may, whoever they found, or whoever the landlord found. It is now the realm of the brokers who are investing huge amounts of money in digital lead generation.

What that really means is they’re finding customers who are searching for office space in a different way, who are typing search terms into Google to look for an office in Bristol for 50 desks. That is not the way that the traditional agents have been previously finding their requirements. We are seeing a whole groundswell of change both amongst the agents and amongst the brokers. There’s going to be a lot of development in that. It will be a race to who is top of the Google search terms and that will manifest itself in more and more competition among the agents and the brokers.

Gavin: We’ve seen interest in workspace that we’re creating by way of LinkedIn, Instagram, and even Twitter. If you got a particularly attractive workspace, you can put some images out on to Twitter, and you’ll get interest from that. The sort of business that are looking for that space will gravitate towards it through the search terms, as you say. We see more investment into search engine optimization, I think, as well as a continuing trend.

Jonathan Hart: How do you prove additional productivity? What is the measure of that?

Steve: You can look at other variables as well, staff turnover or employee turnover, the sick days out of work, lateness coming in, which goes back to the smart building. We’ve lots of technology, which will ultimately when you wake up in the morning, it will tell you if your train’s not working, and the journey into work, if the air quality is poor, it will tell you, “Actually, you should come in to work slightly different hours.” I think finance directors will get a lot more involved on product safety and measuring. Ultimately, the staff turnover and the additional cost to business because ultimately for all these businesses, staff turnover, will be a huge cost to them.

Rupert: But I think as an operator, you have to set a benchmark and measurement system, where you’re going to use it. I don’t think you can just say without any data on it that it’s more productive. I think you’re right. I think it’s actually becoming more accepted even without a measurable benchmark that it is becoming a more productive space. I think for FDEs and CFAs that’s becoming really important. You have to make sure that you’re talking to your members and understanding what your key criteria, whether it’s absenteeism, sick days or increase workforce bottom line growth, whatever it happens to be.

Jonathan Hart: Overall, the use of data is absolutely crucial, isn’t it?

Rupert: Yes, it’s massive.

John: The use of data also becomes crucial for the new occupants into this market. I’m looking at Steve, the landlords here, who have previously gone out to the market and sought data from the more traditional leasing agents who have many, many, many years and decades of that. It’s now switching around to the data that’s being provided by the flexible office sector. We, as a business, provide a lot of those data reports in order to inform new landlords who are looking to enter this market or operators on the supply, the demand, the availability, the pricing, how long it takes to fill a centre.

Increasingly, we’re now beginning to look at real-time data feedback from the operators themselves, which helps beat up both the information that landlords are looking for, but also how the operators market their space in a more productized and more efficient way.

Gavin: One very specific example about using data and productivity is that we’re looking to install CO2 detectors in our office floor plates. There’s lots of studies about when CO2 levels rise, people’s productivities drop. By the building sensing that certain parts of the building with higher CO2 levels, it can then change the internal environment in an office building and make people more productive because they’re not going to be falling asleep as the CO2 levels rise, so change the CO2 levels. That’s the real tangible evidence and data that you can show occupiers.

Jonathan Hart: John, this is a crowded market. How do operators differentiate themselves?

John: Well, I think the operators need to understand, and I’m going to bring landlords into that as well, traditional landlords who are moving into this market, I think they need to understand their customer. Serviced office operators have understood their customer and they’re doing a very, very good job about that. There are different brands, there are different offerings, there are different designs and styles. Ultimately, what we’re seeing is a expansion of the profile of companies taking these spaces.

There will be companies looking for co-working space, there’ll be companies looking for more fixed serviced office environments and indeed, more corporate, individualized, bespoke, managed office solutions. I think what there needs to be a recognition is this is a ever-evolving market where a variety of different products are going to be competing. You need to pick your product offering, and you need to understand your market, and you need to go after that.

Rupert: I agree with that, John. It’s a question quite often of convenience versus destination. Some people look at it and they go, “I want to be on Grape Street in Soho,” or “I want to be in such–“, and you look for the nearest co-working space or flexible workspace. You will have a range of choice because there are so many which we’ve touched on earlier.

The other is destination. I’m a brand so then I want to go to a certain place where there’s a community of like-minded businesses, that’s an alternative. Or I have a budget and so I’m starting to restrict myself in terms of convenience versus destination.

At x+why, for example, we’re building communities of what we call responsible businesses. There’s businesses that look at people and planet, as well as profit and they like to be around like-minded businesses. We try and make sure that as a result of being around like-minded businesses, they can create greater impacts and profit. That’s where people go, whether you’re from the far west to come east, if you want to be around like-minded businesses.

Steve: Just to ask another follow-on question to that it may be, John, more for you, but you mentioned about the landlords and that they’re now creating a variance of flexible arrangements and serviced office offer. What risk do you think, I suppose, risk for yourselves for what you do at Instant offices, but do you think the landlord’s going to offer a competition to you or do you think, speaking of Rupert’s point that actually, if people looking either for geographic location or the brand, landlords just sprinkling their offer throughout the UK is not going to have that much of an impact?

John: At Instant, we are looking to provide as much choice to the customer as we possibly can. That means covering every single flexible office option that’s out there. So far, we cover or we list over 13,000 business centres around the world. I would like to see landlords emerging on our websites in the same way that WeWork, or IWG, or The Office Group are on those and offering their variety of flexible workspace solutions. I don’t see it as competition, I see it as a greater choice for those customers that are looking for flexible workspace.

Rupert: I think what we do agree on for sure is that conventional landlords can’t just think about carving up floors and hoping that they can give the keys to the tenant and not see them for another 10 years. I think if you’re creating a new product, now, you have to be thinking about the level of flexibility that you provide because the conventional lease, albeit as John says, the co-working sector only accounts for about 7% or 8% of the total commercial space within the UK. That has changed significantly, even over the last three years. It’s only going to continue to grow. I think we all agree to that. The attack on the conventional leases is clear and so landlords have to think about it.

John: To add to that, Steve, I’ve often said that one of the only reasons why Instant has a managed office solution is because the operators are not providing those much larger chunks of office space 200, 300, 400 people at a time in a serviced office environment because of their risk profile. We’ve been doing that successfully, but as you know, we’re also looking at teaming up with landlords to also provide choice to customers, to the traditional tenant base where the landlord now wants to be involved in this process and have that direct relationship. I think it’s a fast-emerging market which we can all benefit from.

Steve: That’s definitely something which we’re looking to do at Fiera Real Estates in a new development with CubeX. It’s do we put the wrapper around the building, and because there’ll be communal areas within that building, very likely the showers in the basement for instance, and those are more gym level showers and changing facilities. Do we put the wrapper around the building? We’re offering those facilities and more of a concierge feel to the management regime, and then we can almost bolt on a floor to a flexible space if we want to bring in an operator to manage that on my behalf or maybe have some space which is conventionally leased. It’s a lot more of a hands-on relationship that we have with our buildings now, which is a trend, which we think we’ll follow and grow and grow.

Jonathan Hart: We’re going to have to wind it up in a moment or two, but I’ve got one last question for you all. I’ll turn to Gavin, first of all. Landlords, do landlords think that flexible working is actually a bit of a fad?

Gavin: Well, I think the expression is, change or die, isn’t it? I think the enlightened landlords do, and just to add a further element to the previous point made, I think another component of this will be working with technology companies, with flexible office providers, and with enlightened landlords, in their offices. To summarize, really, I think today’s occupiers are far more nimble than they used to be and I think they’re demanding choice and flexibility. The landlord that can respond to that are the ones are going to reap the rewards.

Jonathan Hart: Rupert.

Rupert: It’s not a fad, but then I’m biased, so [laughs] I think it’s here to stay. I think it’s only going to continue to grow for the reasons we’ve outlined. I think the choice is stark between doing absolutely everything yourself at potentially a higher cost or outsourcing at a potentially lower cost to get a better product.

Jonathan Hart: Steve.

Steve: I think it’s a trend which is going to continue. I think ultimately, people’s behaviour is changing, and they’re more discerning in their choice and they want to be in what they want to be in and they’re happy to pay a premium if that’s what they want. I think that’s why both the flexibility in its use but also the quality of the space and paying maybe a rental premium, but overall, probably no premium, as we’ve discussed, is what companies will be looking to do.

Jonathan Hart: Final word to you, John.

John: Well with over 30% year-on-year growth over the last two years in demand for flexible office space, I would say that the fad has long, long past us and I back this to be the next change in the office market.

Jonathan Hart: Very interesting discussion. Thank you very much for joining us today.

Interviewees: Thank you.

Jonathan Hart: If you want to find out more about Fiera Real Estate and what we do, you can visit our website at fierarealestate.co.uk. Thanks for listening. Join us next time, goodbye.

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