Tesco to pilot flexible office space in store – is it a sign of things to come?

Retail giant Tesco recently announced a deal with flexible officer operator IWG that will see the trial of a flexible office space in one of its stores.

IWG, the owner of office operator Regus, will test out a 3,800 sq ft flexible working area in Tesco’s New Malden supermarket. The flexible working space will reportedly have room for 12 private desks, 30 co-working spaces and a meeting room.

Louise Goodland, Head of Strategic Partnerships at Tesco, was quoted in the Guardian saying: “We are pleased to be working with IWG to offer customers the chance to work more flexibly from their local Tesco. We are always looking to serve our customers and communities better and we will be interested to see how they respond to this new opportunity.”

The Guardian also reports that Tesco is thought to be keen on the idea to offer more flexible office space if the trial proves popular and that the deal emerged as supermarkets look for new ways to fill space in stores where they once sold electrical goods, music or films, which are now largely bought digitally.

Since the pandemic, the demand for flexible working spaces has increased rapidly. In 2021, there were 35,000 flexible workplaces across the world, with a global market value of approximately $26 billion (£21 billion).

So, as the demand for flexible working continues, and a shift to digital leaves supermarkets with more in-store space to fill, does this mean we’ll see more flexible office spaces in the near future?

Dr Gordon Fletcher, retail expert from the University of Salford Business School, comments: “The pandemic has brought so many changes to the ways that we work, live and shop. Even months after a return to “normality” and the continuing preference for working from home, there are still new opportunities to be discovered. The partnership announced between Tesco and IWG has turned up one of these new – even surprising – opportunities. The South Malden branch of Tesco will soon turn over its mezzanine floor to hybrid “homeworking” individuals. The new “work away from work” space will replace the place where only weeks before white goods and electrical items took pride of place.

“This shift in Tesco’s business model is a creative response to the pandemic phenomena that shifted so much retail sales online. It is also a bookend to the twenty years since Tesco Extra’s first started selling these items off the shop floor and became an important contribution to Tesco’s profits over the last ten years. It is an important market and estimated to be worth over £1bn in the UK each quarter. But as we entered the pandemic, the five big eCommerce operators were already taking at least half of these sales. During the pandemic, the balance between online and offline sales tipped in favour of the online retailers. This is not a trend that reversed after lockdowns ended.

“The challenge of online to Tesco and the properties of other physical retailers will continue and echoes the challenge faced by the high street. While the ease of comparisons, choice and perceptions of lower prices will drive consumers to a handful of eCommerce websites, the physical locations offer opportunities for new experiences.

“For hybrid workers looking for variety in their working lives but away from the office or the distractions of a home office, they will be drawn to South Malden and other Tesco stores who make the same offer. Having customers pay for the hire of “just” space is an attractive business model. But there are many other possibilities for Tesco and other stores once they detangle the association of their space and the financial return they can generate per square foot per annum with traditional retail, the potential does open up.

“Would Tesco contemplate opening a creche (for the children of workers who cannot work from home), a crazy golf course (for families looking for a safe evening’s activity away from screens), or a skate ramp (for more energetic all-weather exercise). But considering the importance of work times within our adult lives, offering the chance to “work away from work” is a rich seam of opportunity to mine.”

The rise of multifunctional spaces

Andrew Mawson, the Founder of global consultancy Advanced Workplace Associates, comments: “As the 9-5 models of working give way to more hybrid models, the way organisations consider office space will have to change. The days of desk ownership are done. Offices are expensive fixed costs that generate large amounts of carbon. If they are not adding value, they’ll be jettisoned.

“Pre-pandemic, offices were poorly utilised with a traditional desk being only occupied 60% of the time it was available between 8am and 8pm in a normal week. I expect to see organisations innovating to use office space in a more efficient manner to release unused space and time for monetisation. Large occupiers with an overhang of office space will need to look to a variety of innovative models in a market in which the atomic size of an organisations office footprint might be as little as 30% of its pre-pandemic need.”

Raj Krishnamurthy, CEO at Freespace, a workplace technology company, said: “We have seen how some organisations are becoming ‘multifunctional’ and open for longer hours, which is good news for the retail and hospitality outlets in the nearest proximity. People visiting these offices are rarely working the basic 9-5 anymore. In some cases, they come in early and finish early. In others, they come in later and leave later. Over the course of the day, the duration of footfall naturally increases as buildings are open for longer to accommodate these different working patterns.

“In terms of becoming multifunctional, we’ve seen on the high street how, for example, hairdressers become bars in the evening. Businesses are now utilising similar tactics by offering additional services in their commercial space. It’s a matter of right-sizing or optimising the office conditions so that teams and individuals can maximise their time in the office, but then looking at how to enhance this further in a completely different way. Organisations are thinking more innovatively – and this is good news for the communities surrounding them.”