The demand for flexible office spaces was on the rise long before COVID, but the pandemic significantly accelerated its popularity. In a recent interview on i24NEWS, Jeff Smith asks Mindspace CMO Efrat Fenigson to shed light on the drivers behind the company’s expansion amid the pandemic.
Watch the full interview:
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As Employees Reconnect with the Office, They Seek Flexibility
Smith starts the interview asking “how has the pandemic changed the way that we think about the office?”. One trend that accelerated during COVID, as Fenigson responds, is enterprises favoring flex rather than the traditional office lease.
As a matter of fact, a recent study by CBRE showed that in two years more than 40% of occupiers will have 10-50% of their real estate portfolio as flex, and 17% of occupiers will have more than 50% of their portfolio as flex. Enterprises and large companies are identifying flexible work spaces as an excellent alternative to the traditional way of renting an office for 5-10 years.
“We see now a certain fatigue from working from home”, continues Fenigson. Employees seek social interaction with other people, and employers understand that the office has a big role in keeping employees connected to the brand and to the company. At the same time, employees are not willing to give up the convenient work-life balance that they gained when working remotely.
Taking into consideration the Great Resignation that we see developing around the world, “enterprises are understanding that they have to be more flexible for their employees”, says Fenigson. One way to adapt is to offer more work locations; HQ in one city may no longer be enough, since employees got used to working closer to home during COVID. A satellite office and a hybrid work model are good solutions, both offered by flex.
This also coincides with CBRE’S four demand drivers of flexible office space: employees want to be able to choose where they work from, and more enterprises desire a flexible space. Another driver is how small companies wish to have their employees spend more time in the office, without having to actively manage the amenities or the real estate. To top off the rising demand specifically for flex, the overall office market seems to be recovering.
Landlords Adapt to Enterprises’ Need of Flexibility
Another trend that the pandemic accelerated is landlords having a greater understanding of the value of flex office spaces in their buildings. Landlords react to the changes in the approach by enterprises, explains Fenigson, and they realize that “by introducing flex into their existing assets they can increase the occupancy in their spaces, and they can increase the revenues”. At the end of the day, shorter term contracts and lower financial obligations enable landlords to attract more occupiers.
In response to Smith’s question of why Mindspace is “more than a simple rental venue”, Fenigson describes Mindspace’s business model: management agreements. This solution to landlords is already familiar to the hospitality industry; instead of leasing assets from the landlords, and then leasing them again to the tenants for long terms, Mindspace partners with the landlords and helps them activate and manage their spaces, sharing the revenue.
The bottom line is that whether we look at the occupying companies or at the landlords, flex is in high demand. Employers understand that flexible office spaces offer just the right solution that helps them reconnect their employees to the company, and landlords see the opportunity of higher occupancy that flex can provide.