Cost cutting prompts turn to short leases and hybrid work
Amid widespread expectations that an economic crisis is imminent, business leaders are opting for flexible workspaces and leases to avoid lengthy contracts.
A survey carried out among UK CFOs by Censuswide for flex office operator IWG found that 97% have started implementing cost cutting measures as nine in 10 believe an economic crisis is inevitable.
IWG identified facility spend as a key target for cost cutting, with around two-thirds of respondents targeting a reduction of more than 10% per year.
As a result, half of respondents said they are already opting for short-term leases or shared workspaces to give them flexibility, while 82% view hybrid working is a more affordable business model.
Moreover, nearly two-fifths (39%) of CFOs said they are considering moving entirely to shared spaces.
The survey was carried out in early July, and economic sentiment will likely have evolved since then – though hardly for the better.
The results come as M7 Real Estate’s CEO, Richard Croft, told financial news publication Proactive that the company is planning a REIT focused on co-working hubs. He told the website that he expects there to be more demand for office space than before the pandemic.
While people dislike long commutes, working from home is not an ideal option for everyone, and this could fuel demand for smaller, regional hubs close to where people live.
M7 declined to comment on the plans.
Speaking about the survey, Mark Dixon, founder and CEO of IWG, said: “Hybrid working helps businesses stay competitive and resilient especially in times of economic uncertainty.
“With economic pressures mounting, our latest research shows that CFOs and business leaders are adopting hybrid working for many reasons. Not only does it support the work-life balance and wellbeing of their teams, but it provides a meaningful boost to a company’s bottom line.”
US market update
Meanwhile, in the US, VTS’s latest Office Demand Index (VODI) showed that demand for office space in September was still less than half of what it was pre-pandemic.
Although the index, which tracks new tenant tour requirements, was up two points to 48 (100=average pre-pandemic demand in 2018 and 2019) from the previous month, a cooling job market is keeping demand low.
Nick Romito, CEO of VTS, said: “The verdict is still out on the anticipated depth of any upcoming recession. Combine this economic uncertainty with signs of a cooling labour market, and it’s no surprise employers are pumping the brakes on plans for office leasing.”
Romito noted that demand for smaller offices has remained steady.
Access control goes flexible
As market forces continue to build the case for hybrid working, flexible access control provider SwiftConnect raised $17m in funding from several notable investors, including JLL Global Ventures, Navitas Capital, Cushman & Wakefield and Nuveen.
SwiftConnect consolidates existing building and suite-level access control systems into a single network, which allows landlords to manage security at all of their locations in one place.
Crucially for flexible workers, the software also allows employees to access any location anywhere in the world with a single credential.
As part of the Series A funding round, which takes SwiftConnect’s total funding to $27m, JLL plans to roll out the software with some of its asset owner and tenant clients.
Earlier this year, SwiftConnect helped introduce NFC mobile credentials at Silverstein Properties’ 7 World Trade Center in New York. This allowed users to access the building with their iPhone or Apple Watch without a separate app.
Another tech provider, Sharry, introduced similar NFC-powered access control at Chicago’s 167 Green Street.
In a statement following SwiftConnect’s fundraise, Chip Kruger and Matt Kopel, the company’s co-founders, said: “The investment further validates SwiftConnect’s vision and provides the foundation for our continued leadership in deploying NFC-based mobile credentials as the need for flexible workplaces continues to evolve. This unique value we deliver is why leading commercial real estate and enterprise brands have chosen to adopt our platform.”