"....digital connectivity ... has broken down office barriers and given more freedom for young entrepreneurs and professionals to work without boundaries and follow flexible schedules," the spokesperson, who wished to remain anonymous, said.
The Dubai-based developer had launched Letswork, a community of pop-up co-working spaces that partners with key venues in the city to offer workspaces to freelancers, entrepreneurs and Small and Medium Enterprises (SMEs) on daily, weekly, monthly and quarterly membership basis.
"Flexible workspace made up around three percent of the overall take-up in 2018 which might not seem a lot, however, this figure is increasing by 40-45 percent year-on-year and is up 130 percent since 2014," said Hamish Troon, Head of Commercial Agency at Colliers International MENA.
The emirate currently has over 650,000 square feet (sq ft) of flexible and co-working space spread over 53 locations, according to Colliers' data.
In his email to Thomson Reuters Projects, Troon said the supply of co-working centres in Dubai, from both new market entrants and existing operators, would continue to increase with minimum 320,000 to 530,000 sq ft of space expected to be dedicated toward this sector by the end of 2020.
Ben Johnston, Associate - Office and Business Space Leasing at JLL told Thomson Reuters Projects by email that the market is expected to expand rapidly over the next five years "as Dubai is currently lagging behind leading global markets."
In his emailed responses, he said flexible offices currently account for around eight percent of total office stock in Amsterdam and around five percent in London (700,000 square metres).
"By contrast, the market is tiny in Dubai, with less than 70,000 sqm, accounting for less than one percent of the total office stock," he said.
However, Johnston continued, if Dubai were to follow the example of London (with flexible offices accounting for around five percent of the total stock of office space by 2022), "then we could see as much as 80,000 sqm of such space being added to the market each year over the next five years".
"In reality, future growth is likely to be more limited, but it will still be in excess of the European average of 30 percent per annum (which would represent a total of more than 30,000 sqm being added to supply each year)," said Johnston.
However, end-user interest is yet to reach the levels seen among operators, developers and landlords in Dubai looking at flexible or co-working spaces.
"There is still a slow uptake from occupiers as we see a change in sentiment and pending lease expiries, which would allow for occupiers to relocate," said Matthew Dadd, Partner at Knight Frank Middle East in his emailed responses to Thomson Reuters Projects.
JLL's Johnston said Dubai's "restrictive" regulatory framework and "complex" licensing regime had proved to be stumbling blocks to its adoption of flexible space and co-working trends.
"The majority of Dubai's large free-zones do provide their own flex-space solutions but placed restrictions on third-party operators entering these key markets," he said.
However, he also observed that these restrictive parameters have recently been relaxed, which is resulting in an influx of new operators into the market.
"We are currently witnessing significant new appetite from global co-working players," he said, adding that JLL is currently in negotiations with operators seeking to open 4-5 centres this year with further 4-5 centres in 2020.
The trend of international companies seeking to accommodate 20-30 percent of their staff in flexible working arrangements has also helped shed a long-held perception that flexible or co-working spaces are for SMEs and start-ups only, according to industry experts.
With preferences of new generation office workers changing, traditional developers and landlords are realising that they need to widen their project offerings to capitalise on this surge in demand for co-working and flexible spaces.
"We are certainly witnessing the interest of landlords and developers to create a more versatile offering in the buildings, which would attract the different sectors and occupier types," said Knight Frank's Dadd.
Johnston noted that major free zones in Dubai have adapted to the new trend by incorporating elements of co-working space into their existing and new projects.
While the global trend will certainly impact the local and regional markets, occupier trends will not change overnight, cautioned Dadd.
As the market for flexible space grows and matures, industry experts say the nature of the space provided is also expected to evolve.
Johnston said hybrid models that mix traditional serviced offices and open plan 'co-working' solutions may become the fastest-growing sector of the Dubai market.
For example, to meet the demand from young entrepreneurs, Emaar's Dubai Hills Estate launched The Executive Residences with investors having the option to obtain a complimentary three-year renewable business licence and renewable residency visa, when they pay 20 per cent of the apartment price, through a partnership with DMCC (Dubai Multi Commodities Centre).
The company spokesperson said Executive Residences "takes home-office concept to the next level" and allows entrepreneurs and remote workers to obtain a DMCC business licence and operate their business from the comfort of their own home.
The offering leverages rise of freelancers, flexible working schedules and the growing importance of the start-up ecosystem in the UAE, according to the spokesperson.
He also pointed out that Letswork has partnered with the Business Registration and Licensing sector in Dubai's Department of Economic Development (DED) to provide DED trade license holders with marketing, administrative and organisational support by offering access to its spaces, workshops and SME network.
The co-working market is also making its way into sectors such as hospitality and healthcare.
"We see hotel operators actively increasing opportunities. For example, Sheraton is revamping 400 of their lobbies across the world. The healthcare industry is also set to become more of a focus area; Nook in Jumeirah Lake Towers, offers co-working space for fitness-related companies," said Colliers' Troon.
He said the success of Letswork and other locally developed brands should attract investors and financiers into the market.
Fear of oversupply
Dubai currently has around 55 co-working centres which, according to Colliers, enjoy occupancy levels between 75 to 80 percent, with many even operating at capacity.
With the number of such centres forecasted to grow over the next couple of years, should the market be worried about oversupply?
Knight Frank's Dadd said supply and demand are expected to continue to grow over the next few years, but "this is likely to be at the expense of older, traditional workspaces which are not adapting to change".
"Therefore, the oversupply will depend on landlord, developer and government licensing requirements on how the market will balance itself out," he said.
JLL's Johnston said the a growing market for flexible workspaces would provide landlords with the opportunity to convert some of their existing space and renting out space that would otherwise sit vacant for many years.
He said JLL believes the concept of flexible offices is here to stay, with Dubai set to experience a major boom in flexible office space over the next five years.
"There will inevitably be winners and losers along the way. Those centres that succeed will be those that create the right business model and the right physical environment to attract the new generation of office workers," he concluded.
(Reporting by Syed Ameen Kader; Editing by Anoop Menon)
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