After Covid-19 disrupted office occupier trends, the recovery in demand for flexible office space (flex) is now mainly being driven by corporates looking to adapt to the new world of work, as well as individuals seeking a refuge outside of working from home, according to Savills.

The global real estate services provider explores which cities globally are likely to see the highest rise in occupier demand for flex space. Savills has picked 19 major global office markets and analysed the key factors that are likely to drive flex demand in the coming years.

The study focused on factors that determine how innovative and attractive to talent they are, such as VC investment, education and attitude towards flexible working. It also compared office market characteristics such as demand and supply dynamics, traditional lease lengths and future service sector growth projections.

What drives demand for flex?

In 2018, flexible office take-up by providers accounted on average for about 8% of total office absorption across selected global markets that Savills monitors. Covid-19 came to disrupt this trend, as people’s homes became their workplaces for an extended period of time. In 2021 flexible operators began taking new spaces again, with flex office take-up accounting for 5% of the total last year.

Eri Mitsostergiou, Director, Savills World Research said, “Since the end of 2021 the negative trend has been gradually reversing as operators begin securing new sites for expansion. Demand for flex is now fuelled by a wide range of different businesses, both in terms of sector and size.We anticipate demand for flex to remain strong, especially in an environment of ongoing structural changes and cyclical uncertainties.”

Identifying the global growth markets for flex space

Dubai currently ranks 18^th as the Global Growth Market for Flex Spaces in Savills Research, highlighting the growth potential the market offers and the opportunity for both, service providers and tenants.

The office market in Dubai has been on a growth trajectory for the last few years. Demand for office space has steadily grown on the back of a strong rebound in economic activity and the general positive outlook for regional economies.

Swapnil Pillai, Associate Director – Middle East Research said, “As an established market, Dubai has a first mover advantage when it comes to attracting companies and talents to the region which use Dubai as a springboard for their Middle East operations and expansions.

“In line with global trends, the city has seen a steady increase in flexible space providers over the last few years. Though their share of the overall office market remains limited as on date, it is gradually increasing as new players enter the market and existing providers expand their footprint.”

Most of the prominent flexible space operators across the city are recording high occupancy levels with a few players reporting 100% occupancy and charting plans to further expand offerings across Dubai.

“This bodes well for the overall office sector as landlords benefit from high occupancy levels from flexible space operators in addition to conventional office occupiers, and clients can opt for fully furnished, ready-to-move-in space,” added Swapnil.

Global growth markets for flex space

Rank	City
1	London
2	Mumbai
3	Amsterdam
4	New York
5	Paris
6	Los Angeles
7	Shanghai
8	Ho Chi Minh City
9	Frankfurt
10	Warsaw
11	Barcelona
12	Tokyo
13	Hong Kong
14	Singapore
15	Madrid
16	Berlin
17	Seoul
18	Dubai

Source: Savills Research

At the top of the index were London (1st), Mumbai (2nd), Amsterdam (3rd) New York (4th) and Paris (5th). London, New York and Paris are cities where the concept of flexible offices had emerged and expanded in the years following the global financial crisis and the rise of the gig economy. The economies of these cities are driven by innovation, and they all have an established business culture geared towards flexibility.

Mumbai, in second place, has a fast growing service sector and an active start-up scene. Local operators are particularly active and companies tend to commit for longer periods to flexible office space as they are accustomed to long leases.

Amsterdam ranks third. Despite its small size it has a large proportion of office-based employment, flexible business culture and relatively high levels of VC investment.

Landlords help drive expansion

Landlords are also acknowledging the value of flexibility. Given the capital that is required to set up a flexible office, many providers look to partner with landlords to reduce their risk, whilst landlords are able to achieve rental income at a premium to the market rate if spaces are successful. Besides, several landlords have also converted their space into serviced offices offered on shorter/flexible lease terms as a response to rising occupier demand.

In Dubai, there is growing interest from landlords to provide flexible options across their portfolio by working closely with service providers or even launching their own in-house product.