Evaluating the impact of flexible offices in coping with the uncertainty in future demand

Abstract

The potential growth in working from home poses a large uncertainty in the future demand for office space. Flexible offices can help limit the negative effect of this uncertainty by allowing future changes in use. To ensure that the investment in flexibility is proportioned to the risk that it minimises, the real options methodology is used in this work for modelling the uncertainty in future demand for office space and estimating its effect on stakeholders in the long term. The methodology is tested on an example of a multistorey mixed-tenant office building in Zurich, Switzerland, for which ten designs are proposed and the triggering logic is modelled. The designs have various degrees of flexibility, and the triggering logic mimics the decision criteria of an owner. The results show that under the investigated circumstances, a flexible design with movable walls for enabling periodic conversion of the unrented office space into co-working spaces, and with parcelled technical elements to allow the conversion of long-unrented office space into residential units, is the optimal decision for all involved stakeholders over the building life. The authors draw conclusions about the strengths and limitations of the real options methodology in this context and envision future developments.