At the end of 2023, Hub CEO Brad Krauskopf, CPO John Preece and CXO Rebekah Murphy shared their reflections on all things flexible workspace.
Here are their key takeaways on the sector’s trends, challenges and opportunities – plus what to expect in the new year.
A new normal in office usage
It’s been a couple of unpredictable years in the broader workspace industry, as businesses adjust to new ways of working post-pandemic – juggling remote, hybrid, and returning to the office.
But through 2023, we’re seeing a stabilising trend.
Brad says, “With the exception of Melbourne, all the other cities in Australia have really settled back into a predictable pattern for return to the office. And this is enabling us to offer products and levels of services that are increasing the value of the workspace to the business and their team’s experience at work.”
According to Hub’s recent member experience survey, our members are heading into the office approximately three days a week, which is consistent with Australian office trends. They’re using the office for many reasons: from collaborating with colleagues to focusing on solo work; from hosting client meetings to networking; or, just for a change of scenery.
This reflects the rising demand for flexibility – especially hybrid working models – by employees.
The optimisation of office spaces
Despite news headlines to the contrary, hybrid working looks set on becoming a permanent fixture. Flexibility has become a baseline expectation of employees, one that employers cannot afford to ignore.
That’s why John expects the buzz for corporate real estate (CRE) moving forward to be centred on less, but better, space. In other words, an optimisation of office space. And already we’re hearing the quote ‘flight to experience’ used in place of the traditional ‘flight to quality’.
“Organisations will expect the space to be experiential, to provide amenity, to be flexible and amazing – so their people will want to go there,” John says. “But they don’t need as much space.”
Which brings us to the other emerging trend in flexible workspace and coworking: desk sharing. And by this we don’t mean the open or flex desk areas of the space.
There’s a move away from the traditional 1:1 occupancy model, and at Hub Australia, we have certainly been seeing this trend play out post-pandemic.
Rebekah explains, “Pre-COVID, a company with 30 people would take a space with 30 desks. But now we’re seeing businesses optimise their space to the needs of their team and their flexible work schedules. That team of 30 people are now more likely to consider a space for 20, but potentially with a dedicated meeting space.”
Renewed demand for flex workspace
After a spike in 2022, demand for flexible workspaces levelled out in the second half of this year – although it remains significantly higher than pre-COVID levels. And that’s no surprise with businesses returning to the office and seeking to attract and retain talent in a post-pandemic world. Overall, we expect demand for flexible workspaces to significantly increase in 2024.
But interestingly, it’s not equal levels of demand across the board. Instead, the demand varies based on location, operator brand, and space quality.
Brad puts it this way: “We’re seeing that businesses are really using Hub as a talent attraction and retention tool, whereby having the hospitality-focused workspace experience is assisting them with getting their teams.
“It’s providing an experience that builds culture and teamwork by making it attractive for people to come into the office.”
Rebekah couldn’t agree more, adding that the impression that people have of flex workspace is also changing as people become more aware of the product offering.
“Whilst coworking remains the obvious choice for satisfying all of the workspace requirements of small and scaling businesses,” she says, “larger organisations are also no longer seeing traditional leased space and coworking as mutually exclusive.
“Rather, a blend of leased space, service amenity and satellite locations interstate or in suburban areas provide the opportunity for large businesses and government organisations to tailor the workspace experience to their teams – and budget.
“There’s also a better understanding of the additional service and hospitality layer that you get from a flexible workspace,” she continues. “And the benefit of being able to adapt your space to your evolving business needs. That’s particularly useful for businesses that are focused on growth and on building out their teams.”
Growing focus on workspace hospitality and amenity
This year has also shown us that businesses are increasingly dissatisfied by the traditional office space. That they want more than just desks and chairs.
“Businesses are realising the importance of a hospitality-focused workspace experience,” Brad explains. “And that flight to premium and flight to experience is evident in both the flexible workspace and traditional commercial office space.”
In fact, according to Rebekah, the growth in the experiential side of the workspace is something that has moved really quickly in 2023.
“For Hub, it’s been extremely exciting. We have been able to explore new and unique customer experiences that provide an additional layer to the workspace experience. This helps brands and businesses attract and retain the best talent – and provides an environment for teams to thrive in.
“Using our flagship Hub Martin Place as an example,” Rebekah continues, “we were able to push the boundaries of what a premium workspace experience looks like. We incorporated five-star hotel-like experiential elements like the lifestyle concierge services, elevated hospitality experiences and tailored wellness initiatives.
“And we partnered with other premium brands to provide additional services, events and experiences to our members and their teams. We’ve hand-selected brands that align with our ethos and our desire to create a premium experience – and this includes endota, Barberhood, Sorry Thanks I Love You, Cocktail Porter, and Fabbrica, to name a few.”
Rebekah adds this focus on workspace hospitality has also led to a significant increase in demand for meeting and events spaces – from both internal Hub members and external businesses.
“At Hub, we’re seeing a rise in demand for our dedicated meeting and events spaces – about three times what it was pre-COVID. Hub’s differentiator is once again our hospitality-first mindset and five-star service. Businesses are looking for a seamless premium hospitality service and that’s what Hub delivers best.”
Landlords entering the flex field
2023 also saw a new player entering the flex game: landlords.
“Landlords are now being expected to play a role for their tenants to help them get their teams back to the office,” says Brad, “whether in activating their buildings or providing other services.”
This is good news, as it opens up a new avenue of expansion for flex space operators who can provide strong hospitality-led services to landlords.
And with Hub Australia being the leader in Australia’s workspace hospitality, it makes perfect sense that landlords are looking for our expertise as they enter the world of flex.
John highlights our partnership with CharterHall for 555 Collins Exchange this year as one example.
“The interest from landlords in Hub providing flex and business lounge and building activation has been huge,” John says. “We are excited to be at the forefront of this new development in the sector, and we definitely expect this opportunity to grow moving forward.”
What to expect in 2024
Going into the new year, there are headwinds for sure. But at the same time, there are loads of opportunities for Hub and the sector to look forward to. Brad, John and Rebekah share their predictions for 2024.
1. A stronger brand game
Brad expects the new year to see a stronger recognition of brands and the workspace experience they provide.
“The role that the office has for a business has changed,” he says. “As opposed to a production line for completing office tasks, the office is now very much used as a tool for attracting and retaining talent. And for creating learning opportunities, professional development opportunities, and for innovation.
“This means that brands need to match the experience in a very consistent way. Because, just like hotels, people choose the workspace based on the experience and the cost that they want to pay. And the first thing that a consumer has in the market is an understanding of the brand.
“We know that individuals recognise the different hotel brands, what they offer, what they stand for, and what the quality is,” Brad adds. “And whilst the coworking sector is not there yet, certainly it’s evolving in that direction.
“So when we go into 2024, we’ll see workspaces – whether commercial office towers or flex – really turn up the focus on brand. It’s all about how to differentiate the brand – and how to deliver an experience that matches that brand.”
2. Increased flex space and business lounge partnerships with landlords
As touched on earlier, landlords entering the flex space provide new growth opportunities for flex space operators.
Plus, with management agreements becoming more normalised in the Australian market these days, that presents another avenue for expansion. One that Hub has been successfully tapping into, as 555 Collins Exchange shows.
“Because management agreements are a different commercial structure,” John explains, “that provides a pathway for an operator to leverage a landlord and their access to capital – and make new sites viable.”
John also believes this serves as a reminder for Hub to continually build on our strengths.
“Going into 2024, the key focus will be for us to keep providing an experience beyond just a desk and a chair. And also to build on having a network of locations, so a scaling or enterprise business can come into a whole range of different workspaces, not just that one office.”
3. Accelerated growth in workspace hospitality
When it comes to workspace hospitality in 2024, the only way to go is onwards and upwards. Probably at an even faster pace than we’ve experienced so far.
Rebekah says, “I expect the focus on workspace hospitality and the experiential side of things to continue to move in the industry next year – perhaps even further and more quickly than what we’ve seen”.
As an example, Hub Australia already operates a business lounge in Brookfield Place, Sydney, which is available for use to all the tenants in the building. This service will be replicated between Brookfield and Hub in 2025 in Perth.
With more people realising the importance of the role that workspace experience plays in the future of work, both direct competitors and indirect competitors will be keen to play in this market. But Rebekah is confident that Hub will continue to own the evolution of workspace experience in Australia.
“I’m excited about how we can continue to lead the market in the hospitality and experiential space. To keep reinventing what we’re doing, establishing new partnerships, and ensuring experiences that are aligned to what our customers want, need, or could benefit from.
“I’m really confident that we can stay at the top of our game. To continually push the boundaries of what we can offer and make sure we’re supporting the businesses that are in our spaces.
“It’s a challenge we’re up for,” she affirms.
4. The need for workspace optimisation
Another interesting trend to watch in 2024 is how businesses with a national or multi-city presence will optimise their workspace requirements – across both flex operators and commercial offices on traditional terms. Access to utilisation data and employee feedback will play an increasingly important role in how and where an organisation chooses to have its offices.
“It’s going to require a mix of technology and partnerships between landlords and workspace hospitality providers like Hub,” Brad says. “And I believe we’re only scratching the surface at the moment of where those partnerships and technology are going to need to go.”
Overall, Brad is very positive about where 2024 will take the flexible workspace sector as a whole – in particular, for those brands on the premium hospitality-focused end of the market.
“The mix of high buildout costs and continued high costs of people and other expenses will mean a need for efficient processes and systems,” he says. “You’ll need to optimise management technology because the ability to spend on capex and people continues to be constrained by inflation.
“But it will be a great opportunity for flex workspace operators that have the experience and management in place to respond to those challenges.”
It’s clear that as we approach 2024, the flexible workspace sector is navigating through a phase of consolidation and innovation. But by understanding these nuanced trends and adapting strategies accordingly, we’re confident that we can thrive in this ever-evolving landscape.
