A Flexible Shift: A Look At The Workspace Ecosystem Post The COVID-19 Pandemic Since the COVID-19 crisis, there has been the consolidation of the workspace players, as the pandemic has created winners and losers within this industry.
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The workspace ecosystem has significantly changed since the COVID-19 pandemic that has profoundly impacted how corporates work and the spaces they work in.
This shift has directly affected businesses, where we saw many mergers and acquisitions as many looked to expand their reach and range of products, but we also saw an influx of new players in the workspace sector, such as online marketplaces, aggregators, brokers, operators, and financiers.
Workspaces are termed flexible in their size, design, and rental contract terms. This flexibility allows companies of all sizes to make use of such spaces to incorporate a hybrid work model which has become, dare I say, the norm since the pandemic.
Nowadays, entrepreneurs, SMEs, and larger corporates are no longer fixated on leasing a large office space on a long-term multi-year contract to house all of their employees. On the contrary, in parts of Asia, Europe, and North America we have seen firms downsize to smaller offices, adding and utilizing on-demand flex spaces to accommodate the majority of their workforce's daily workspace requirements.
This may be a sound strategy to, one, accommodate a more global workforce as has been the case post-pandemic with firms hiring globally and working virtually; two, satisfy employee preference for a hybrid model, where employees can work from home, an office and/or flex space, and, three, significantly cut costs and risks associated with large, long-term rental contracts at a volatile time when office occupancy is approximatelt 40%-60 %.
Since the COVID-19 crisis, there has been the consolidation of the workspace players, as the pandemic has created winners and losers within this industry. Many companies are looking to acquire smaller players to gain a foothold in new markets or to expand their presence in existing ones. In times of turmoil, the opportunity for the big to acquire the small presents itself.
One example can be seen in IWG, one of the largest flexible workspace providers, acquiring several players such as The Wing (2021) and the Instant Group (2022), the latter in a deal worth over AED1 billion. In Dubai, a a 2020 report by JLL states that, "from a base of around 50,000 sq. m. in 2014, the market has more than tripled to almost 160,000 sq. m. by mid-2020."
Growth in the number of startups and SMEs, as well as the adoption flex workspaces by larger corporates were the main drivers behind the demand increase that led to the tripling of market supply. However, according to various reports from Savills, Knight Frank, and JLL, the flexible workspace industry in Dubai and the wider GCC region is expected to experience continued growth– the expectation is to at least match previous years' growth rates of about 20-30%.
This growth can be explained by the larger acceptance of remote work and hybrid work models by employers. Add to that, there has been a focus on continued diversification of the economy and attraction of more foreign investment, both of which will lead to more and more companies setting up and requiring flex workspaces. All of this leads to the conclusion that we can expect continued growth and demand for flex workspaces in Dubai and the GCC.
Early adopters like Fluidmeet, among others, have already embraced this shift, focusing on flexible workspaces to accommodate their workforce and leveraging remote work by hiring locally and globally. We believe software-as-a-service products and services, like the ones offered by Fluidmeet, which support corporate stakeholders in managing their workforce's space requirements, will continue to be in demand because they solve key pain points, highlighted earlier, for both employers and their employees.
We at Fluidmeet believe there will be more merger and acquisitions over the coming period while the market, especially the tech industry, adjusts to the new climate. Consolidation should lead to increased efficiency, improved services, and innovation. We also expect to see even higher adoption by corporates of flexible workspaces and hybrid work models in the GCC and MENA region, with an emphasis on innovation, efficiency, and flexibility, as more employers and the workforce explore alternatives to traditional office environments.
The next few years will be significant to the formation of new and amended corporate workspace policies. This will be an interesting space to keep an eye on.
