We talked with flexspace expert Kurt Mroncz to find out how this concept went from maybe to mainstream in corporate real estate strategy.

Searching i-FM’s archives is a good way to track the development of trends. ‘Coworking’ began to appear on our news pages with increasing frequency in 2017, first as an interesting idea and subsequently as a growing marketplace for specialist service providers. ‘Flexspace’ began to make regular appearances on our pages early in 2020 as Covid disrupted personal lives, organisations, markets and the wider economy. While serviced offices had been around and utilised for many years, SMEs and large organisations alike were turning more to flexible real estate options to accommodate their teams. More of the big corporate property advisors were also talking about flexspace becoming an established part of the market landscape, as well as an option for developers and occupiers who found themselves with surplus space on their hands.

At this point, flexspace is a bit of a catch-all label for workspace occupied on a flexible basis. It covers everything from coworking, which is generally about individuals, through serviced offices and up to ‘managed space’, which is bespoke sourced and fitted-out space occupied by up to hundreds of employees for a year or more (but not to the point where there is a long-term lease involved).

Growth and development
Mroncz (right), who is managing director of flexspace advisory firm Offices iQ, picks up the story: “Even in the pre-Covid period, flexspace was growing significantly, becoming a common solution and a part of many large organisations’ real estate strategies. In the ‘old days’, flexspace was generally seen as something you would use if you were going into a new market, if you were unsure about future plans or perhaps the main office was being refurbished.  However, over the last ten years it has developed into much more of a mainstream option, typically driven by the need for agility.  

“Other changes we were seeing in that period included the growth of managed space, generally larger amounts of space fitted out for the incoming client with one monthly charge and an expectation of the client being there for a relatively short term – perhaps a couple of years or possibly longer, saving the client the direct cost of the fit-out and the commitment to a longer lease.” 

But Covid, as in so many cases, changed all that. “In the initial six months or so of the Covid period people had no idea how to think about future requirements – it was all about how on earth do we transition to 2000 people working from home,” Mroncz recalls. “The due diligence, the risk assessments, the IT requirements….how do you get all this in place?  Under the circumstances, we found ourselves working with clients helping to get them out of flexspace, rather than into it. Which does highlight one advantage of flexspace over a long lease when there is no one occupying the space.  Many clients found themselves stuck paying for long-term leases, even though the offices weren’t being used. Whereas with flexspace they could cancel their agreements at the anniversary, move out and source new space once Covid-caused lockdowns allowed.

“As we moved through the Covid period we saw some organisations becoming concerned about productivity, collaboration and the mental health and wellbeing of their new homeworkers. This proved to be a boost for coworking centres in some cases. But overall, large corporates were still weighing up the best ways forward.”

Mroncz continues: “Then, as we returned to ‘normal’ from early 2021, it became clear that things had changed. 

“What are the big changes? Flexspace now is always considered as an option.  Our enquiries are up something like 40% as everyone wants to remain agile.  However, like-for-like requirements have probably dropped in size – which often reflects the impact of hybrid working, where not everyone is expected to be in the space at the same time.  That, of course – again in general terms - has always been true: desks are not occupied all the time.  One thing Covid has done is make organisations look harder at desk utilisation, asking how many desks do we really need?”

Meeting the need
It's in this space that Offices iQ sits very comfortably. The business was launched six years ago by Mroncz and Dave McCloskey, both former members of the management team at Regus (now IWG plc).  “We started our own business,” Mroncz explains, “because the serviced office industry is very transactional. What we wanted to do was take a more consultative approach with the corporate sector to help them navigate their way through the flexspace market.  So now we work as strategic partners with large organisations around the world.  We work as an extension of their real estate departments, in effect. In six years, we’ve gone from being a two-person start-up to an organisation that has helped clients move close on 5000 people into flexspace over the last 12 months.” 

About 30% of the firm’s business is in the UK; the rest is international. The demand for flexibility is very much a global thing, Mroncz says. 

A typical Offices iQ client might want 100 desks in New York or five in Bangalore.  The firm’s team creates a brief for what’s required and submits this to the local market - they have strong relationships with flexspace providers around the world. However, as the market is growing so quickly, they have also developed bespoke software that continually scans for new locations. With the best candidates selected from that process, they discuss with the providers what can be offered, then provide the client with a full market appraisal of all options. The client then has the opportunity to view the sites involved and, with Offices iQ support, selects the preferred option and negotiates a mutually acceptable agreement between operator and occupier.

“The big benefit to clients is that we are expert in identifying the options and assessing them in terms of what the client actually needs and wants,” Mroncz says. “And we are only looking at flexspace – we don’t get involved in long-lease space. We’re laser-focused on flexspace, as one client recently put it.” 

It’s no small benefit that Mroncz and McCloskey both have experience running flexspace centres for the world’s largest provider. “We understand the market, how space can be modified to meet client needs, and the deals that can be agreed to meet the needs of both client and operator,” he says.

Continuing with the explanation of the business model, he adds: “More and more clients are now being proactive with flexspace rather than reactive, which requires us to complete upfront analysis and advice on existing corporate real estate portfolios and in turn helping to define the best strategy for making flexspace a successful part of the wider property strategy. It’s about maximising the cost benefits, but also the agility that this brings to the client business.”

Going mainstream
Post-Covid, Offices iQ is seeing significant growth in this industry. It’s not just the likes of the recognisable names – IWG’s Regus and even WeWork, for example – who are pushing for growth. “We are seeing new players, new locations, existing players taking on more locations and landlords that used to hold out for a long lease tenant now converting to more flexible terms,” Mroncz says.  “And what that means for the client is a far greater range of choice in solutions.  However, flexspace is now so much in demand that it can be quite difficult to find the right space – and that’s particularly true for larger amounts of space. For larger requirements, we often work with operators and landlords to acquire additional space to satisfy the client need.”

One more thing that this market development means is better quality of space. “Everyone has upped their game,” Mroncz notes. “The quality of space that is available is superb. Quite often it is better than an organisation would produce for itself. In addition, they are not paying to create the space. It’s a win/win.”

But flexspace isn’t just an option for the high-end, Mroncz adds. There is plenty of space across a wide price range. 

So, this is a multi-dimensional marketplace that looks set to continue growing significantly. Within this, Mroncz sees an ideal solution evolving – he calls it the ‘dynamic model’. 

Elaborating on this, he says: “There is less than ever any one-size-fits-all solution.  The mix has become accepted as the best approach and the mix has become more mixed. If you take any large organisation, they may have long-term leases for large locations, probably in or near major cities, perhaps 2 – 3000 people where it makes sense to commit long-term to the office. Then they might have smaller locations elsewhere, with perhaps a few hundred people in offices that will be on a managed basis, bespoke space sourced and fitted out to the client’s specification; and then serviced offices in other locations, perhaps with fewer people; and then probably remote workers – perhaps the sales team – who will use coworking spaces, dropping in to lounges and coworking centres as and when they need to. 

“With such a mix of solutions available and with different worker types, which can shift over time with economic or other considerations, the conversations around understanding and meeting needs are much more in-depth these days. That is why we approach our work in a consultative way, to help define the ideal mix for the client teams and the work they are involved in.”

It's been a quick journey from maybe to mainstream for flexspace. And with lots of demand, rising quality, new ideas and new solutions, it’s hard to disagree with Kurt Mroncz when he says: “It’s exciting times in the industry!”