How flexible office model is disrupting the local market

Flexible office space at Kofisi.

When famed American architect Frank Lloyd Wright designed the first open plan office in Buffalo, New York, in 1903, little did he know that his creation would morph into yet another facet of office design: the flexible office plan.

Fast forward to 2019 and Wright’s open plan office style has once again evolved into a plug-and-play system where firms don’t have to deal with the hassle of setting up and running office space to concentrate on their core business.

“Millions of workers go to an office which does not belong to any company they work for, at pretty flexible times, sit at a desk that is not specifically theirs, work alone or collaboratively with people who maybe don’t even work for the same company. Then they head home when their work is finished, at no determined time at all,” says Freeofficefinder.com.

Now, flexible office space is slowly becoming the new rave in Kenya with a number of companies buying office space and converting them into ready-to-use units based on specific clients’ needs.

With the new model, Grade A office developers hope to reel in office clientele in a market with an oversupply of office space.

A few weeks ago, Kofisi, a provider of flexible office workspace across Africa opened a new office site in Karen, Nairobi.

In June, Workable began to offer Grade A office space in Nairobi at Sanlam Tower, Waiyaki Way, while in February, Nairobi Garage opened its third co-working space at The Watermark Business Park in Karen where it took up 14,000 square feet.

The breakout area at Workable in Sanlam Tower, Nairobi. [Peter Muiruri, Standard]

Nairobi Garage has set up other flexible office locations at The Mirage Towers in Westlands and Pine Tree in Kilimani.

Proponents of this model say the future of office work depends on companies reducing or eliminating non-core office setups while giving more freedom to their employees. 

“The flexible work space model is disruptive because it tracks the future trends of the workplace that focus on creating environments that are highly desirable for future talents. Added to this is the flexibility offered in terms of leases that companies want and the consistency of brand representation. This significantly enhances productivity as it allows companies to focus on their core competencies without back office support,” says Kofisi CEO Michael Aldridge.

In addition, Aldridge says Kenya presents a stable growth curve owing to the little penetration of the model in the local market.

“Cities like New York and London are already at 15 to 20 per cent growth of co-working business models versus traditional spaces. Nairobi, on the other hand, has a one per cent penetration rate. There is a case for the business model with significant room for growth,” he says.

Daniel Ojijo, the chairman of Homes Universal, says ongoing government efforts to improve the country’s rating as a preferred business destination as well as an educated population has opened the way for all kinds of investors, including those in the real estate industry.

“The Government has eased restrictions on setting up business. Kenya is now Africa’s fourth largest economy with immense potential for growth with readily available and skilled workforce. In addition, improved infrastructure and more star rated hotels are giving Kenya a competitive edge,” says Ojijo.

Samir Patel, the Workable CEO, says flexible offices allow organisations to get an office almost immediately and for shorter periods such as three months as opposed to a traditional office that requires five or more years’ lease agreements and lengthy contractual periods.

“The single licence fee covers all operating requirements for ready-to-use office space. Such include high quality ergonomic furniture, business amenities such as high speed internet connections, reception services for visitor and courier management, facilities management services, security, utilities, network printers, and 24-hour access,” he says.

Patel says office space and meeting rooms are available on demand, thus companies do not need to invest in space that is not engaged throughout. This, he adds, simplifies the requirements to either add or reduce space.

However, Ojijo says the model needs more thought if it is to appeal to long-term goals of companies.

He says there are firms that still need to operate independent offices that give them a greater measure of privacy.

“I don’t see much disruption on the market by this new trend of flexible offices as they mostly appeal to individuals and firms with short-term goals. Most corporates sign leases of close to six years. It might not be economical for some firms that need some independence to commit long-term occupancy in the new furnished offices,” says Ojijo.

Other realtors, however, seem convinced that the flexible office plan is an idea whose time has come.

Knight Frank’s Kenya Market Update-1st Half 2019 report highlights the business case for flexible workplace that may soon overtake the traditional office rental.

“The increased interest is due to the flexibility that comes with serviced offices in comparison to traditional offices. Serviced offices allow organisations to have flexible lease agreements and office space, lower operating costs and the opportunity of being located in a prime address,” says the report.

Knight Frank expects this niche market to continue recording growth over the next few years.

According to the Knight Frank’s report, prime commercial office rents in Nairobi remained unchanged in the first half of 2019 with absorption of Grade A and B office space in Nairobi declining by eight per cent in the period compared to the second half of 2018.

The realtor attributes the decline in office uptake and stagnation of rental prices to the continued oversupply of commercial space in some locations and the current economic slowdown.

“As a result, some landlords are providing concessions such as longer fit-out periods, partial contributions towards tenant fit-outs, or giving discounted rentals so as to retain existing tenants and attract new ones,” says the report. 

Sidebar

Fall of the largest flexible office startup a wakeup call

Until September this year, WeWork, the office leasing company founded in 2010, was the most valuable startup in the United States. At the peak of its glorious days, it was valued at $47 billion (Sh4.8 trillion).

Like similar businesses, WeWork would buy a floor or two in a building, create smaller offices and common areas and hand them over to other startups at affordable rates.

But the wild ambitions of its founder and CEO Adam Neumann saw the company crash in a matter of days. Among other improprieties, Newmann owned buildings that were then leased to WeWork, creating conflict of interest. The leases were backed by his own company loans that were charged way below market rates.

Nuemann even purchased the trademark to the “We” part of the company name for which he was paid close to Sh600 billion for the licence by the company.

With reputation injured, the company lost its IPO bid and is currently struggling to honour its many lease agreements.

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