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

The potential growth in home-office working poses a large uncertainty on the future demand for office space. Flexible offices can help limit the negative effect of this uncertainty by allowing future changes of use. To ensure that the investment in flexibility is proportioned to the risk it minimizes, the real options methodology is used in this work for modelling the uncertainty of future demand for office space and estimating its effect on stakeholders in the long-term. The methodology is tested on an example multi-story mixed-tenants office building in Zurich for which ten designs are proposed and the triggering logic modelled. The designs have various degrees of flexibility and the triggering logic mimic the decision criteria of an owner. The results show that, under the investigated circumstances, a flexible design with movable walls to enable a periodic conversion of the unrented office space into co-working spaces, and with parceled 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’s life. The authors draw conclusions about strengths and limitations of the real options methodology in this context and envision future developments.