Could the movement currently shaping the future of work also be the future of franchising?
The flexible workspace sector has reached a tipping point. The demand for flexible workspace across the world has seen record growth in the last few years, with flexible working spaces set to grow up to 30 percent annually for the next five years, according to global real estate giant Jones Lang Lasalle (JLL). The industry’s impressive growth is why franchising, which has historically been able to support this type of significant development, is the natural next chapter of the flexible workspace story.
Traditionally, only brands like McDonald’s, Hilton Worldwide or Dunkin’ used to come to mind when consumers thought of franchising. But take one look at any of the latest rankings of the top franchise brands, and you will find that the industry today is long past associating franchising with fast-food restaurants or hotels. The future of franchising is diverse, and the market is more understanding and accepting today of the franchising model than ever before.
When that kind of acceptance and diversity is combined with an emerging market that is growing rapidly, an investment opportunity with considerable benefits begins to emerge. The mobile workforce is set to hit 1.87 billion people globally by 2022. Those 1.87 billion people will need flexible workspaces in major hubs across the world. This dynamic situation creates the same kind of opportunity that entrepreneurs had ten years ago with boutique fitness concepts like Orangetheory Fitness or CycleBar when the fitness industry began to explode. It’s the kind of opportunity that comes along so rarely that sceptics say it doesn’t exist in the market anymore – until it does.
Flexible workspaces are now woven into the fabric of our societies. They offer flexibility to businesses and their staff whenever and, crucially, wherever they need it. Research conducted by leading flexible workspace provider, International Workplace Group (IWG), shows that 80 percent of workers in the U.S. would choose a job which offered flexible working over a job that didn’t. Additionally, almost a third (30 percent) of people value being able to choose their work location over an increase in vacation time. Based on this research, the flexible workspace market will continue to grow because it is driving employee satisfaction, and satisfied employees are more productive. In fact, flexible working has shown to improve retention rates, diversity and productivity, and according to a recent report by Regus, an IWG company, it is estimated that by 2030, the U.S. could see an economic boost of as much as $4.5 trillion annually from flexible working. Millennials are the first generation that are used to the idea of flexible workspaces and as they become leaders at large companies, the notion of flexible working becomes more acceptable. Flexible working will not just be seen as a perk but as a requirement in most industries.
Within the flexible working industry, a new trend has emerged, which is also being driven by millennials: An increasing number of coworking spaces are occupied in vibrant retail shopping centers, airports and train stations. The shift in real estate is because these locations are perfect for the on-the-go multi-tasker and offer a myriad of amenities at hand. While amenities and locations may change over time, the flexible workspace concept is not going anywhere.
Flexible offices have undoubtedly begun to emerge as an investable asset class. Not only do they offer a strong economic business model and low employment costs, but also significant income potential. The operating model is proven, demonstrably successful and opportunities for growth are significant in not only major markets across the country such as New York City and San Francisco, but secondary and tertiary markets as well, especially with brands, such as Regus and Spaces, that are globally renowned and therefore benefit from good brand equity. In fact, Regus created the flexible workspace concept and has remained the industry’s global leader since its inception 30 years ago. Flexible workspace, in my opinion, will soon be taking its place alongside hotels and restaurants as a separate asset class and a core part of institutional portfolios.
Darin Harris is CEO of IWG, North America, where he leads the development and expansion of IWG across its companies, including Regus, Spaces, HQ and Signature by Regus, playing a key role in developing IWG’s franchise offering.