Will Flex Space Compromise Transparency

Flexible office space providers, including co-working and serviced office providers, have emerged as one of the biggest drivers of demand in some of the world's largest and most transparent office markets.

Increasingly, the flexible office sector is spreading beyond co-working space used by start-ups and small businesses and is being utilised by multinational corporates, who in some cases are taking significant volumes.

Questions Around Transparency Emerge

The structural shift towards flexible office space raises questions about potential impacts on real estate market transparency, such as growing concerns around the ability of real estate actors to monitor the market with accuracy.

Traditional real estate operators can track the spread of flexible space providers but are unable to track vacancy and tenants within the buildings themselves. Flexible office operators may let large volumes of space, but this space will subsequently be placed back on the market and compete with other schemes for major corporate tenants, skewing the understanding of current market conditions.

On top of this, information is tightly held by private operators and thus there is limited visibility on pricing, terms and size in this increasingly important segment of the market. Furthermore, usage and access may not conform to conventional measurement due to the range of options and memberships available, including dynamic pricing structures. As a result, vacancy in flexible space may change more rapidly than traditional space.

Together, these concerns mean that it may become difficult to track real estate markets with as much precision as before. If flexible office space was to reach a 'critical mass, we could see a division between the traditional real estate industry and leading flexible space operators, and it is possible that we might also see major flexible space operators seeking to disrupt traditional data providers through technological means. While flexible office space provision is highest in the largest and most transparent markets, the phenomenon is expanding globally and also into secondary hubs, and will increasingly come to the fore in coming years.

Mitigating Risk In Emerging Markets

In emerging markets, co-working is increasingly seen as a method of mitigating risks around low transparency for multinational firms. This has long been the case in the serviced office sector. However. rather than improving the transparency of the wider real estate market, this is a case of neutralising risks by paying a premium and sticking with globally recognised brands.