Shared spaces offer hope for the offices sector
By Wainaina Wambu | April 29th 2021
Over the last year, firms have realised the possibility of remote working with most scaling down on office space.
Also, the business uncertainty brought by the coronavirus pandemic has made more businesses opt for short-term leases and more flexible alternatives.
Bridging the two is the co-working or flexible office model, which has seen growth during the pandemic.
“We are seeing many companies that had traditional offices admit this is not working anymore and started pursuing something more flexible or even hybrid models where employees come into the office in shifts,” explained Workstyle Director Ronald Nyairo in an interview with Real Estate.
Workstyle is one of the growing serviced office spaces that allow firms to “plug and work”, removing the hassles of setting up a fully-fledged office. It was started by Mr Nyairo and co-director Federico Von Bary.
Nyairo reckons that it has become difficult to project business operations and firms now want flexibility.
“In Pre-Covid-19 period, you could do your sales, cost numbers and do a relatively accurate prediction of what the next year or two would look like, or even when to hire. Today, it’s very difficult to do that,” he said.
“Having a flexible workplace allows businesses to ramp up capacity or reduce rather than being tied to a five-year lease.”
The co-working business model has been growing, even expanding to the counties, with prices ranging between Sh1,000 to Sh5,000 a day.
Multinational flexible workplace providers such as Regus have also identified the potential in the Kenyan market and have been scaling up their operations.
They now have shared spaces in UpperHill, Westlands, Kilimani, Nairobi CBD and Kitisuru.
The biggest beneficiaries, perhaps, of co-working spaces, are technology startups.
There are quite a number of innovation hubs where upcoming technology businesses can kick-off as they scout for investors, including pioneers Nailab and iHub.
Outside Nairobi, shared workspaces are also growing. For example, Kikao-64 opened a Sh100 million co-working space in Eldoret town targeting tech startups.
Others firms offering such services in Nairobi include Ikigai, Nairobi Garage and Workable.
“Because of the changes that the pandemic is causing, there’s room for all the competitors to grow each other in the next one year,” noted Nyairo.
The flexible workplaces also come at a time when big firms are moving away from the central business district.
In a previous interview with Knight Frank Kenya Managing Director Ben Woodhams, he notes that the serviced office sector was picking up faster during the pandemic period compared to long-term leases.
“Office occupiers and decision-makers want that flexibility that they can get in serviced offices that they can’t get in long-term leases,” he explained.
“As they return to work, they want that flexibility and serviced offices provide the perfect solution for them.”
Commercial long-term leases protect landlords and do not have a termination clause except for breach of contract, said Nyairo.
“Legally, a landlord is more protected if they sign a lease for more than five years, and that matches a lot with their financing. If a developer is building a commercial building financed through a 10 to 15-year loan, they also want that sort of coverage.”
Mr Von Bary added that this might not change quickly, especially for Grade A offices, which presents the opportunity for flexible offices.
“If landlords don’t adapt they are going to stay vacant for very long and that’s a good thing for us. We want those long periods and can pull in tenants,” he said.
Von Bary said an outfit such as theirs can approach the landlord and sign a 10-year lease, then get clients who want flexibility - even a room for holding a one-hour meeting.
“Rather than the landlord having to chop that up into many stalls and destroy the building, we come and solve those problems and the building still has a premium feel to it,” he said.
“Very few people are signing large floor space and expecting their staff to be there from 8am to 5pm.”
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