#15 "The growth of the coworking offering is now fueled by partnerships" Lee Elliott, Knight Frank

Lee Elliott is a based in London expert on Flexible workspace for the international real estate advise company Knight Frank.
Lee is the co-author of a report on the new "Power of partnership" with the workplace as a service sector.
"The coworking phenomenon has changed real estate for the better", say Lee Elliott. "However, we need more discipline to figure out what coworking is about. There is a melting-pot which doesn't help the market, in my views."
The report's aim is to make the different understandings clearer.
The report looks at the last decade of coworking in London and the UK Market, with 3 main phases. The first one, in the beginning, was the one when coworking spaces were not taken very. We called that an "un-easy co-existence". The traditional
Five years ago, one entered a second phase. The tone changed. Many landlords figured out unconventional lease model was important for them to address the needs of the new profile of tenants. There was also a desire to embrace more flexibility.
Landlords recognized that coworking operators, big or small, could add value and attract in conventional lease. It provided an over-flow for the occupier as well. You activate the building. You allow to easily have more extra space for occupiers. Some landlords even created their own brand, like British Land.
Some have been successful with that.
"That second phase is progressive. It brought more flexibility and also more competition in the coworking market", observes Lee Elliott.
Now, the third phase has started, likely exacerbated by the Covid crisis.
There will be a growing distinction between pure coworking services and managed solutions.
Classical coworking will be with space shared on the same floors, with different players. The managed solutions will run a flexible lease, with additional services, but for the benefit of only one occupier.
Social distancing will be hard to manage in the classical coworking world, for the moment. On top of that, operators are financially challenge. This is damaging. On the flip side, the manage solutions are more and more demanded.
Four things will drive the market, as far as I see it, two short term and two longer term :
- short term, conventional buildings will only allow 50% occupancy. Hence people will home work or go to the flex market to add capacity
- many operators are in the process of moving, Covid will have an impact and delay the process, and short term demand will be demanded.
These two are drivers for the flex market due to the need for backups.
On the longer term, starting in 2021:
- occupiers want to align their plan on real estate, and commit less on long term. Flexible is a more structural option, then, to be considered.
- the digital transformation of business will have no move back.
There is three times more coworking capacity in London than in NYC.
With the Covid, occupier will spread their staff.
We could have the emergence of satellite offices around London. It's a big opportunity for coworking operators, the big players like the smaller independent players. We were seing this model rising in Australia, already, and even in Kenya.
It's a universal trend, with leading cities, such as London. Other will soon follow.
It will take 5 years. We have been terribly binary in the Real Estate. Either work from home or from the head office.
Covid is enlightening us on the other options. Twitter story is incredible. Allow people to work from where they want, including satellite workplaces close to their home.
The office of the future will be a choice, not an obligation. There will be the need to justify the commute.
However, for the moment, it's still questions and concerns. Part of the solution will come from flex. And maybe we will also figure out that we need the 30 or 60 min commute time to think and take a breath.