Experts from Workthere.pl, a platform providing access to flexible office space offerings, report that Europe’s flexible office space market showed significant resilience in 2023 despite numerous global economic issues. In 2024, operators in this sector will continue seeking top-of-the-class office spaces, putting increasing attention on amenities and ecologic aspects.
“For several years, the European flexible office space market has demonstrated exceptional resilience, largely driven by tenants’ growing interest in more flexible solutions to attract and retain talented workers. This is reflected in the raising standards by operators who aim to offer top-tier spaces and include in their offerings amenities and ecological aspects. Occupancy rates remain stable, and we observe that larger companies, which still constitute a significant group of tenants in this market, diversify their portfolios and choose to rent flexible offices” – comments Ed Bouterse, Director of Workthere Europe.
The situation in Poland reflects this trend, where the flexible office market remains resilient despite rising rates due to increasing operational costs. Tenants also show increased interest in ESG and employee wellbeing. Companies are encouraging employees to return to the office, hence the importance of these aspects for tenants seeking offices in attractive buildings holding environmental and ecological certificates. Meanwhile, large and medium-sized enterprises indicate the need for flexibility when starting new business activities or providing project space for workgroups – adds Thomas Jodar, Associate Director, Savills, and the Workthere project leader in Poland.
Trends for the flexible office market in 2024:
TOP TIER OFFICES
The competition to attract and retain talent will continue to drive demand for top-tier spaces, encouraging operators to broaden their employee amenities offerings. Today’s operators are introducing solutions that go beyond standard gyms, yoga rooms, cafes, or outside spaces, going for amenities similar to those available in five-star hotels, such as private chef services or rooftop bars.
LOCATION, LOCATION, LOCATION
Tenants interested in high-end spaces also seek prime locations that provide convenient access and a full range of services nearby. This has resulted in an increase in activity by operators of flexible offices in the most attractively central business districts, a trend expected to continue in 2024. However, the undersupply of office space in many European cities, particularly in Madrid, Munich, and Barcelona, which struggle with low vacancy rates (below 5%), will significantly affect demand and availability of flexible offices.
ESG – ENVIRONMENT, SOCIAL RESPONSIBILITY, CORPORATE GOVERNANCE
Issues related to ESG are becoming ever more important for both operators and tenants who are looking for spaces in buildings meeting the highest environmental standards. Potential solutions may include spaces that not only meet ESG requirements but are located in buildings holding LEED or BREEAM certificates. Flexible offices will continue to play a unique role in decarbonization strategies due to the potential for sharing optimized and top-tier space.
GREATER FLEXIBILITY AND COST CONTROL
Economic uncertainty and high capital costs maybe driving increased demand and interest in the flexible office space sector. Several firms are opting for further diversification and more flexible solutions due to the needed flexibility in work organization during periods of uncertainty. Post-pandemic, some larger firms have reduced their occupied office space to facilitate hybrid work models, limiting spending and opting to use flexible offices.
BOOSTING PROFITABILITY BY GENERATING ADDITIONAL REVENUE
Increased operational costs have put pressure on margins over the last two years for many operators. The costs for renting a workspace have increased in the premium segment in most European cities – a trend not seen in the economic sector. Therefore, it is expected that operators will seek to boost profitability in 2024 by exploring additional ways to increase margins besides raising rates. One possible strategy for extra earnings could be to generate more revenue from hiring out spaces for conferences and events, co-working desks, or offering clients bundled technological solutions.
