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The Future of the Office Space Industry

by | Productivity

The Future of the Office Space Industry
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Slowly but surely, the world is coming back to work in offices. But the office space world as we know it may be continuing to evolve as we know it. While renting office space will never go away, the manner in which people use those office spaces is changing depending on the people and the times. The pandemic may have accelerated habits and trends by a few years.

In today’s blog, we’ll explore what to expect in the future of office spaces.

Fragmented Market

Before 2020, the office space provider market was more homogenous, owned by a few big companies. Today, the market is seeing new businesses enter the market, resulting in more competitive offerings and niche office space services. According to Forbes, 250 flex space providers joined just last year. It’s likely that more competitors will join focusing on a particular service (for example, spaces that are exclusive to health and wellness workers) to stand out from the competition.

Other providers are turning to franchises. Similar to the model employed by McDonald’s or 7-Eleven, these spaces are operated by an independent group of people but pay certain dues to the parent brand. The strategy has shown to be effective for rapid scaling, so long as the brand outlines a clear set of objectives and guidelines for each franchisee.

Post-covid research is still being collected, but the outlook is positive. Consider the following coworking statistics from AllWork.Space:

  • Despite the pandemic, many markets globally have shown increased demand for flexible workspace, and on shorter terms. The Instant Group forecasts flexible workspace supply growth of over 21% in 2021.
  • The Commercial Observer estimates that coworking spaces are likely to double or triple in the U.S. in five years.
  • 71.5% of workers that used coworking prior to the pandemic plan to return to it, while 54.9% of remote workers that didn’t use coworking before stated that they will consider joining a coworking space as a remote work solution in the future.
  • Inner cities have become the most popular location type to date in 2020 with a 52% share of demand.

Similar to coworking, office space on demand is becoming increasingly sought after for similar reasons: flexibility, access to an entrepreneurial environment, and above all, affordability. Large corporations are seeing that maintaining large office buildings can be counterproductive to their financial goals, while startups see flexibility as an opportunity to focus on more pressing tasks.

Office Space Costs

The going rate for office space has changed dramatically in recent months. Cheap offices are becoming more prevalent in certain cities, while demand is pushing prices up in other areas. One statistic shows that the average monthly rate for a coworking space is highest in Washington D.C. (at $843), while the lowest is in Houston ($220).

The United States is showing strong signs of recovery, largely due to stimulus action enacted by the government. Some companies were able to take out PPP loans to pay their employees, and reallocated the funds as “work from home stipends.” These funds could be spent on coffee, office supplies, groceries, or even a coworking pass.

Other companies are instead investing in technology, realizing a physical office space is no longer needed. Virtual offices became popular alternatives as stimulus money was spent on tools, software, and labor rather than physical space. They remain a staple component for many national and even international brands today, largely because of their affordability.

Office costs will continue to fluctuate throughout the year, but as more people become vaccinated and return to the office, the increasing demand will only force prices to rise from their all-time lows.

Live Work Play Communities

In today’s environment, well-designed office space isn’t enough to attract and engage the modern workforce. Instead, urban planners, architects, and developers have been proposing the concept of “Live Work Play communities,” places where people can go to their jobs, live nearby in affordable homes, and then have access to public spaces and recreational activities.

Live Work Play communities (once called mixed-use developments) have historically featured office spaces in proximity to other basic needs and amenities, like event spaces, restaurants, hotels, gyms, and of course, residential communities. This makes it more appealing to stay in certain neighborhoods, a way for companies to improve employee engagement and encourage work-life balance.

The change in name reflects the shifting nature of office culture: from a factory production mindset to a greater focus on the other, equally important aspects of life, such as family, friends, school, food, and recreation.

Satellite Offices

Another trend that has been growing for some time is the concept of satellite offices. These are office branches opened separately from a company’s headquarters, varying in location and size. For major enterprises and corporations, satellite offices are great for a couple of reasons:

  1. Expansion to new areas and markets – Satellite offices make it easy for companies to open in new geographic locations and test out new markets, without opening a major headquarters location. This can be useful for servicing a wider area, experimenting with new products and audiences, or just increasing overall visibility.
  2. Great for distributed teams – For teams scattered throughout the country, satellite offices offer a centralized location for meetings, creative collaboration, or even team-building activities. Nothing beats communicating in person.
  3. Useful and convenient amenities – Working from home or at a cafe sounds pleasant in practice, but in reality, they tend to lack basic equipment and supplies, such as printers, fax machines, conference room tech, and so on. Satellite offices provide everything you need to get work done efficiently.

If you are part of a large or fast-scaling company, consider looking into satellite office spaces. Discover your options on our plans page.

Examples of Future Office Spaces

Want to get a glimpse at the future of office space? Here are a few notable places to watch.

Bell Works (Chicago)

Formerly an AT&T headquarters building, the Ameritech Center in Hoffman Estates, IL is being renovated into a one-stop destination for business, entertainment, and culture. The 1.65 million square foot complex will feature mixed office spaces, restaurants, retailers, and more, exemplifying the core concept of Live Work Play communities.

Capital One (New York)

Another location demonstrating the potential of offices is Capital One’s office in New York, NY. Designed like a coworking space, Capital One employees have access to a number of recreational activities, such as ping pong, foosball tables, video games, a ball pit, and a kitchen stocked with snacks.

Despite the challenges of last year, the future of the office space industry looks bright. Not only is there more competition to drive innovation, but we can also expect shifting attitudes to the way we use and share space with others, particularly to offset the rising cost of traditional office space. We’re excited to be at the forefront of this new era.

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