Although the economic crisis might finally have come to an end, end users are still struggling with office spaces that are too large for their more efficiently structured organizations. The hidden vacancy is steadily declining but still amounts to 10% of total vacancies, while rigid long-term real estate contracts signed before the crisis are only ending in the next few years. End users have learned their lesson: preferences are strongly moving towards short-term contracts with high-quality flexible provisions. The availability of facilities has become more important than the ‘ownership’ of these facilities in-house. Catering facilities, meeting facilities, and other hospitality services are being increasingly shared as a preference. The lesson from the economic crisis and the emergence of the sharing economy has strengthened the acceptance of sharing communal facilities within the facilities and corporate real estate world. This, in turn, has resulted in the emergence of multi-tenant buildings for corporate end users, collaborative workspaces, and branded offices.
These shifting requirements of the end user force the market for offices to develop towards an operation driven property model in which availability and services are the determining factors. This is new to the world of offices, but old news for the hotel world. Hotel concepts are informing the future of offices as well. This applies to economic models, service mentality, and distinctive concepts, brands, and experience.
Hotels leading the way
Inns and hotels are historic institutions. You could always sleep anywhere but the type of bed or service was dependent on the costs. The well-known contemporary hotel chains have a relatively short history that spans only 50 to 60 years. The first chains were founded in the USA, where Hilton established the first coast-to-coast hotel chain in the 1940s. Europe lagged behind and only established the Accord-brand Novotel in the 1960s. These chains aimed at delivering standard quality that was identical and recognizable all over the world. Brands distinguished themselves from one another on the basis of the quality of their facilities, established in the now famous hotel star ratings. This particular system of diversifying hotel brands based on standardized quality was maintained until the 1990s.
However, in the first decade of the twenty-first century the number of hotel brands rose exponentially. These brands are not distinguished by their different star ratings, but rather by their respective individually focused lifestyle concepts for different target groups. CitizenM, for example, does not have any stars, but offers the individual traveller a lively lobby where he or she can make new friends and provides a room with a bed, shower, and WiFi. Their motto is ‘affordable luxury’. The Radisson Red explicitly expresses this sentiment in their introduction to their guests, ‘Radisson RED is a new hotel philosophy where lifestyle, not luxury, is the inspiration.’
The office market is now making a similar but accelerated development to what was seen in the hotel world. For many years, the office market was little more than the provision of working spaces where ‘location, location, location’ served as the defining factor. Regus, the first brand of chain offices, only entered the market in 1989, yet quickly dominated that market with the same promise that hotel chains make to their clients: guaranteed standardized quality all over the world.
This has since swiftly expanded to a wider range of branded offices which have emerged in the last five years, including Spaces, Seats2Meat, HNK, and Tribes. This diversification is not driven by differences in the quality of the working space, but is based on differences in character, working style, and the community that makes use of it. The 'lifestyle’ push can be observed even more clearly in multi-tenant start-up buildings such as B. Building Business in Amsterdam and het Schieblock in Rotterdam and also creative multi-tenant concepts such as the Caballero Fabriek (The Hague), the Van Nelle Factory (Rotterdam), and the Kauwgomballenfabriek (Amsterdam). het Schieblock in Rotterdam and B. Building Business in Amsterdam supply minimal building quality but, instead, offer an optimal start-up community and lifestyle that provides the perfect working environment for employees and thus creates an ideal location for organizations. The rental costs combined with service costs are comparable to that of top-level locations; but you pay that price for the sense of community, not the quality of the building. The newly combined building on Witbautsraat in Amsterdam, which was the former residence of the Ministry of Economic Affairs, will be opening in April 2016 as the new Zoku (extended stay) hotel and is combined with WeWork (hotel and catering and conferencing organization). This collaboration takes this concept one step further.
The strength with which this revolution is moving forward is best illustrated by the growth and market value of international chains such as Impact Hub (with 11,000 members and 63 locations), and the co-working offices of WeWork. WeWork has only existed for five years but has more than 25 locations and a market value of ten billion dollars. WeWork now also boasts 1,300 working spaces in Amsterdam. This chain does not direct its focus on professional property managers, but rather invests its efforts on the employees of end users. WeWork does not promise a working space, but rather 'personal fulfilment' that goes beyond lifestyle. This is a wonderful example of an organization with a Massive Transformative Purpose (see the article ‘The Connected Community’ for more about MTP)
The symbiotic office-hotel relationship
Sociologists once identified three locations where people spent their time: the first location was at home, the second location was at work, and the third location the space where you sought relaxation. The place and time constraints of work have caused work and private life to overlap; the first and second locations have become increasingly intertwined. The new generation of offices boast an increasing number of relaxation elements within the working environment. This includes work-cafés, in-house coffee companies, and even the all-inclusive campus offices of Google. The second and third locations are now also moving towards one another. Branded offices provide the hospitality we are used to seeing in hotels, and hotel lobbies are becoming collaborative workspaces. When you enter the Volkshotel in Amsterdam you have to look twice to see whether you just walked into a hotel or are standing in a branded office concept by Spaces. This symbiotic office-hotel relationship with its concomitant intertwining of work and relaxation is a key trend for 2016. The next step in the development of the meshing of work and relaxation is the ‘workation’. The working vacation is a trend in which the true generation of digital nomads is not going to work in the comfort of the local coffee shop on the corner, but visits exotic locations where they can be optimally productive in a relaxing environment. If this sounds too far-fetched, just search for Hubud in Bali on Google and look at its beauty and splendour. Suddenly the idea of a workation becomes a great deal more realistic. If you would prefer a location somewhat closer to home, the short stay hotel concept Zoku declares ‘the end of the hotel room’ and combines a hotel stay with work.
The ‘last frontier,’ then, is the entwining of the first, second, and third locations, and even this phenomenon is already emerging on the horizon. WeWork is currently working on a concept title 'WeLive’ where living, working, and community are being combined.
Branding, lifestyle, and community form the distinguishing and price-determining factors for an increasingly larger section of the office market in 2016 and are driven by a new employment ethos of a new type of employee and more critical end users. Office costs are less influenced by square metres but are driven by the working environment; less by long-term contracts and more by the availability at the moment that the end user requires it. The hotel and the office are growing ever closer in new forms of operation-driven property.