With the traditional office fading into obscurity, this emerging sector is more enticing than ever.
Words by Kieran McLoone, deputy editor for Global Franchise
Alongside the holistic disruption to how consumer-facing businesses operate, one of the biggest changes that the COVID-19 pandemic has brought to the business world is an almost total shift to remote working.
More than ever before, employees and employers alike are seeing the benefits of a flexible arrangement, and the traditional fixed office space has never been less appealing; both from a financial perspective, but also in terms of how people now live their lives, with more free time as a result of drastically reduced commutes.
As such, the world of flexible workspace franchising has emerged as a very bankable investment. It’s a sector that’s already been on the rise, and between 2010 and 2020, the number of flexible centers in the U.S. almost tripled.
It’s estimated by organizations like Instant Offices that 35 per cent of all offices will be flexible by 2023, and by 2027, the global industry could be valued at around $111.68bn, according to Zion Market Research.
Put simply: this is a ground-floor opportunity if there ever was one.
The future is flexible
To fully understand why the future of this industry is a bright one, it’s important to first consider why so many franchisees have already entered the market.
“The simple answer is that it’s just a better way of doing something that’s already existed,” says Matthew Szafaryn, director of franchise development for Venture X, a U.S.-based flexible workspace franchisor. “Office spaces have always existed with these long-term leases, but anybody right now can see the growth in this industry and the need for it. It’s also a very simple and easy business to run. You only need a few employees, so entrepreneurs, hotel owners, landlords, real estate owners – they can see this as a way to get high returns for their investment and diversify, or take advantage of an industry while it’s still early.”
Flexible workspaces are becoming so ubiquitous that even brands outside of the industry are getting involved. Raddison Hotel Group, for example, recently launched its Hybrid Solutions virtual office spaces and partnered with Zoom to provide video conferencing for meetings and events in lieu of in-person gatherings.
“It’s just a better way of doing something that’s already existed”
Similarly, Hyatt, the international hotel franchisor of more than 950 locations, introduced its Office for a Day program back in December 2020 at more than 400 of its sites. For $65 a day, guests receive a private room with office conveniences, paired with the amenities of a hotel experience.
Landlords of traditional office spaces are also seeing the appeal: “One key trend that I have seen emerging in the last few years and has accelerated through the pandemic are traditional landlords moving into the flex space with their own flexible products,” says James Walton, director at form_ by Hadron, a flexible workspace consultancy. “We see hybrid offices or managed offices that sit between a coworking and leased space as a future trend, as occupiers want to have their own self-contained space but all the benefits – such as flexibility and turnkey solutions – that come with a coworking space.”
Keeping things local
One of the most surprising shifts for flexible workspaces to come out of the pandemic is that the locations that this industry began in – big business hubs like Los Angeles and New York City – are no longer as appealing for new build-outs or conversions. This is a far cry from 2015, when half of all flexible office space in the U.S. was located in just five states: Florida, Texas, New York, Illinois, and Chicago.
“We’re seeing a lot of franchisees who are looking for more suburban-type markets outside of those downtown or CBD areas,” says Szafaryn. “That allows these multinational clients to decentralize their office. You see a lot of people in New York right now who are deciding that they don’t need to go into an office space, which will really hurt the rates in those areas. My guess is that those will be slower markets to regain their growth and opportunity.”
“We’re seeing a lot of franchisees who are looking for more suburban-type markets outside of those downtown or CBD areas”
To combat this, franchises operating in the flexible working space need to really prioritize differentiating their offering from the many emerging competitors. For Venture X, one way to achieve this is a reciprocal membership agreement; similar to what the likes of Anytime Fitness offer, where guests can attend any location in the world with just one membership.
“The more that we grow, the more that our members and franchisees benefit,” explains Szafaryn. “You’ve got smaller companies that might have offices around the world, or multi-national companies that have staff go around the world, and they can use all of our offices. It’s benefitting our owners by allowing them to get that additional revenue, and allowing our owners to bring new members in.”
Other franchises have focused on locating their offices in high-demand locations, which will become more of an appeal once pandemic restrictions begin to subside.
“We are purposely located in a vibrant, downtown area that allows our members to take advantage of the food, beverage, retail, and entertainment businesses that are within walking distance of our space,” says Pam Tanase, co-founder of Workzones, a Santa Barbara-based brand. “Not only is our location desirable for our members, but it also allows us to focus and provide the ‘work’ aspect without having to provide the ‘fun’ factor.”
Workzones also offers on-demand meeting and conference rooms, which have temporarily seen a decreased demand due to less in-person meetings, but usually provide yet another revenue stream for its franchisees.
Still not convinced that flexible workspaces are the next big thing? As Matthew Szafaryn puts it: “Back in the day if you landed at the airport and you didn’t have a ride, you’d call a cab or wave one down. Now, 99 per cent of people are calling Ubers. I’m not saying that 99 per cent of the market will be flexible workspace, but it will be a regular thing that people recognize and use.”
