Why the flexspace market in the suburbs is booming

Why the flexspace market in the suburbs is booming

In the wake of lockdowns around the world during 2020, suburban office space has been winning out at the expense of that in city centres.

Workplace operators have seen direct evidence of this trend. IWG CEO Mark Dixon says that in the UK, the brand can expect “a pivot into the suburbs and the rings round London, Birmingham and Manchester”. Meanwhile, in the US in recent months, the company says it has seen a 30% drop in deals in downtown New York, at the same time as those in Southern Connecticut rose by 40%.

Plus, sales of space in smaller offices for one or two people are up by a fifth compared to pre-Covid-19 levels, says IWG, adding: “Our research shows these trends are being driven by the growing demand for distributed working and working closer to home.”

A recent report into the UK flex market by The Instant Group notes: “What we are seeing is a rise in demand within the smaller, regional markets, with the highest demand growth of all being within tertiary markets.” As a result, the report’s authors go on to suggest “we can all be cautiously optimistic for the future of the [flexspace] sector”.


A pre-pandemic trend accelerated by Covid-19

Flexible workspace was already on a strong growth curve before the pandemic, with property consultancy JLL forecasting last year that it would take up 30% of total office workspace by the year 2030. Covid-19 has seriously disrupted the office market and has expedited this migration. “The coronavirus pandemic is putting economic pressure on tenants but also making it hard for them to forecast their property needs, which is driving a preference for flexible space,” said the company.

Global real estate giant CBRE adds: “There has been a significant acceleration of the decade-old trend towards greater workplace flexibility.” Its client survey in June 2020 found that 33% of US firms are actively considering more use of flexible workspace. And there’s been evidence of similar growth under way in markets as far apart as Germany and India.


An opportunity for investors

For prospective franchise partners and building owner partners, all this presents an opportunity. The early wave of flexspace offices focused largely on city centres and central business districts. Increasing demand and the need to create capacity in suburban locations to meet the growing level of demand will require new development and conversion of existing properties.

As CBRE notes: “The quality, unit size and availability of office real estate outside of CBDs is not uniform across the US. This could be an area of opportunity as the multi-node concept in real estate evolves.”

And this is why IWG is looking to partner with franchisees and building owner partners to help make the most of the trend. “It has become increasingly clear to us that capitalising on the opportunity [in flexspace] is not something we could do ourselves – and certainly not in the time frame that we’d like to do,” says Thomas Sinclair, Chief Investment Officer and Co-Head of Network Development, IWG. “What franchising and building owner partnerships allow us to do is accelerate the rolling out of that network.”

“We’re setting out to create a true global and national network – and that’s where franchising comes in,” adds Stephen Holloway, IWG’s Franchise Director. “The market is moving fast. We need to move faster and faster, and we want to find franchise partners who can help us dial up the pace of the growth of our brands.”

Imagine being an investor in the very early days of franchised restaurants, gyms or coffee shops. That is the kind of opportunity available as a potential IWG franchise partner. The flexible workspace sector has reached a tipping point. With workers deciding they not only want to live outside city centres post-Covid-19, but to work there, too, demand for temporary offices, meeting rooms and coworking areas in the suburbs is set to explode.

This is what makes the flexible workspace sector one of the most exciting growth markets in the world. It is also why many now view it as the next franchise frontier. Entering the market now, as an early adoption franchise partner, enables individuals to diversify away from traditional industries and generate strong returns on franchise investments right from the start.

Are you keen to capitalise on the growing trend for suburban flexspace? Find out more about IWG’s franchising partnerships