In 2009, the carnage of the global financial crisis gave birth to co-working spaces in their current form to take in the newly redundant and entrepreneurial folks.
But it wasn’t really the start-ups and freelancers that propelled the global flex space sector. It was the corporate organisations that started moving in, initially to profit from the feverish exchange of ideas, then on a much larger scale, to benefit from short-term leases and hassle-free premises under the space-as-a-service model, that turbo-charged the growth of the sector to an annual growth of 31 per cent between 2015 and 2019, according to American commercial real estate services company Jones Lang LaSalle.
Fast-forward to 2020 and the world is facing-off against Covid-19, a virus so indiscriminate in its reach that it brings enormous challenges to both the health of the global workforce and our economies.
The pandemic has also had serious implications on the office culture as we knew it, thanks to the work-from-home orders, social distancing regulations and lockdown measures that forced a lot of people to work remotely.
Coming at the backdrop of an oversupply of commercial office space in Kenya, there is no doubt that this market has been hard hit by the pandemic. However, while everyone is going through some turbulent time, market insiders believe in the long term the flexible office space providers will manoeuvre through. And there are many reasons the odds are in their favour.
Take the declining productivity for employees working from home, for instance. When the World Health Organization declared Covid-19 a global health crisis and several companies sent their workers to work from home, many executives expected that productivity would go down. Instead, the opposite happened. Many companies reported a tremendous increase in productivity, with Twitter and Facebook becoming the first global giants to announce that they would allow their employees to work from home forever. Many others vowed to give up their physical office spaces altogether.
But months into the pandemic, the initial spike in productivity is starting to plateau and go down, much to the disappointment of many executives.
Cracks emerging
According to the Wall Street Journal, business-focused international daily newspaper based in New York City, as the work-from-home experiment stretches on, some cracks are starting to emerge. Projects are taking longer, training is tougher and hiring and integrating new employees has become more complicated.
According to the report, some employers say their workers appear less connected and bosses fear that younger professionals aren’t developing at the same rate as they would in offices, sitting next to colleagues and absorbing how they do their jobs.
Albeit necessary for the safety of employees and their clients, these findings have poked holes into the concept of full time remote working as the new normal. And executives across the globe are taking note.
“It was people being terrified of losing their jobs, and that fear-driven productivity is not sustainable,” Mr Bock said.
As the debate about the future of the office rages on, more companies and experts now envision a hybrid future, with more time spent working remote, yet with opportunities to regularly convene teams.
Hybrid system
“If you ask me, the future of office space will be a hybrid system. What I mean by hybrid is a situation where you have teams working from home and others in the office,” says Federico Von Bary, co-founder of Workstyle Africa, a flexible workspace provider, with two locations in Westlands.
For Winnie Gachagua, occupier services manager at Knigt Frank, and whose job for the last seven years has been to represent corporates in commercial negotiations with landlords, the physical presence of an office will remain very relevant even after the pandemic.
“I think the flexibility of being able to work from home and the office has allowed the office to become a personal choice rather than an obligation,” she told DN2 Property, “However, the office still remains very essential for collaboration, socialization and mentorship.”
But even so, she does not foresee a situation where the world will revert to the traditional office set up after the pandemic.
“Even if by sheer miracle we are able to curb the spread of the virus and Covid-19 becomes history, I don’t see us going back into the traditional office set up or working environment where all of us need to sit in the office at the same time,” she says.
“What we realised is that this does not work for today’s organisations. Unlike in the past when companies took too long to grow, these days companies are growing much faster. So, the idea of locking them in a six year lease when they are likely to outgrow the space in three years doesn’t make sense,” says Ronald Nyairo, the other Workstyle Africa co-founder.
Cost
There is also the fact that companies are trying to be lean on cost, he adds, “So they look at it and say, ‘okay, if I go the conventional way, I have to start building and buying furniture and making all these investments upfront before I even know how business will turn out.’ The good thing with our business is it’s a lean pay-as-you-go solution.”
Ms Gachagua shares similar sentiments saying that rent is a huge cost in the operation of any business. So, in a bid to try and build financial resilience and ride the Covid-19 tide, one of the things that a lot of companies are trying to cut back on is rent, she says.
“Leases in Kenya are very punitive and a lot of companies are locked in long terms leases— think 6 years— which they can’t get out off quickly.”
When the pandemic hit, Ms Gachagua says, they started receiving a lot of inquiries from tenants who were looking to sublet their space, or have a conversation with the landlord regarding surrender.
“For me that just shows that organisations have worked out that the new working style, either work from home or combination of working from home and having some staff occasionally working from the office might actually be a permanent change and something that they would want to adopt.”
“The health pandemic will eventually go away. What will happen is this company with 50 people will be like ‘we need an office for 25 people and we will coordinate when and who will go to work using our IT systems,’” he observes.
Scale down on floor space
For landlords, this means that the company in question will have to scale down on the floor space that they require.
The way Mr Nyairo looks at things is in such a way that there will come a time when the company will need all its employees in the office, maybe to bounce ideas off each other, collaborate and strategize.
“So, instead of taking a 50-person office which you will only use fully once in a while, you can have a 25-person office in a facility that has access to meeting rooms and event spaces for ever. So for that one day a month when you need everyone in the office, for a couple of hours, you can get access to that big space and after that you just continue paying for what you need,” he says.
Research show that the modern worker value aesthetics, comfort, flexibility, and community in the physical spaces they occupy while getting their job done, this is also an indication of the changing role of the office.
“People used to come to the office to work; that has now changed. People are working from home in their pyjamas and getting the job done. So I think what will happen is people will be coming to the office to collaborate and network,” says Mr Von Bary.
He predicts that the day people come to the office is the day they will do less phone calls and emails.
“While it might seem as if they are doing the least amount of work on the day, actually, that is the time they are doing very high value work, in form of collaborating, consulting, making networks, and exchanging business cards.”
Work from home trend
While social distancing regulations and lockdowns in a number of countries to battle the Covid-19 outbreak is forcing the majority of people to work remotely, the trend has been on the rise for a while now, with regular ‘work from home’ growing 173 per cent since 2005 according to Global Workplace Analytics.
For Knight Frank, this is a trend their international occupier research team has been observing for some time now. “The flexibility of work as a focal culture is a trend that we have been observing pre-Covid-19. So, the pandemic has only accelerated that particular change and proved that actually it is possible, with technology and obviously a few changes to the technology aspect of any company,” offer Ms Gachagua.
To put it simply, a flexible office space also known as “flexispace,”is a workplace designed to create dynamic environments. They’re comprised of everything you’ll find in a traditional office—desks, chairs, phones, computers—arranged in a way that’s highly versatile. Ideally, the concept is meant to accommodate the diverse needs of workers.
Traditionally, clients of flexispaces have always been SMEs, start-ups, consulting firms and international firms that are setting up in Kenya, but lately, Mr Nyairo reveals that his organisation has been receiving inquiries from people who would never have considered flexible offices as a solution.
“Recently, we had a small diplomatic mission approach us and ask, ‘what kind of solution can you do for us?’ This has traditionally not been a client for flexible offices. So to have a diplomatic mission seek this kind of solution speaks to the changing trend,” he says.
Kofisi, yet another flexible workspace provider, with five centres in Nairobi and across six countries in Africa, provides a variety of fully serviced and sophisticated office space for businesses of any size.
Enterprise-grade facilities
According to Michael Aldridge, Kofisi CEO, members working in any of their private offices and customised offices get access to enterprise-grade facilities and professional on-site services. Their business model is so flexible that if you are a member in one of their centres in Nairobi, you can walk in and work from any of their six other location in Africa without extra charges. The company also offers bespoke Space Finder Service for businesses looking to relocate to Africa where they search, fit-out and manage all the workspace needs.
Mr Aldridge has also been receiving a new type of client, whom he describes as ‘the one who wants to relocate from their incumbent situation, whether that being because it’s faster and quicker but I think also because of protection of the staff and managing the teams.’
Both Workstyle Africa and Kofisi say they have seen the number of inquiries go up. The Kofisi CEO told DN2 Property, “We have registered more inquiries in the last three months than we have had in the three months prior.”
Mr Nyairo said, “We would have to go check the numbers but I would say in the last two months we are receiving a lot of inquiries, definitely more than we were getting before the pandemic. But what’s more interesting to me is not that they are more, it is who they are coming from.”
With experts speculating that the biggest casualties of this pandemic as far as office space uptake and use is concerned will be the traditional landlords, Ms Gachagua says that one thing this pandemic has done is to push landlords to be more flexible in lease negotiations.
“If you look at the market pre-Covid-19, real estate negotiations in prime office blocks were skewed towards the landlords,” she notes.
But not anymore, landlords have lost the upper hand and this pandemic has brought about the much-needed collaborative relationships between them and occupiers.
Customer-centric real estate industry
Yet another thing the pandemic has turbo-charged is the need to have a customer-centric real estate industry. And by so doing, real estate agents will have no choice but to move away from just a simple product to a business line that will add strategic value to landlords and occupiers.
For traditional landlords, things have changed so much so that today tenants are asking for the option to contract space as the business progress into the pandemic and landlords are also willing to give delayed rent commencement period for leases.
“There is also a new development, which has caused a bit of stir and controversy in the sector,” says Ms Gachagua, in what is perhaps the biggest indicator of how far traditional landlords have lost power.
“A lot of tenants are now asking landlords to issue them with side letters allowing them to break the lease agreement if the need arises.”
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