Commercial Real Estate News
Coworking, Flex Office Sectors Poised For Significant Growth
U.S. Companies Plan For More Flexible Work Practices
Global property consultant CBRE is reporting this week that the flex-office industry has emerged from the pandemic-induced downturn and is now poised to play a key role as companies adapt their office portfolios to accommodate more flexible work practices.
Flex-office providers have spent the past year trimming excess or unprofitable locations from their networks, resulting in a collective reduction of 10.1 million sq. ft. of flex space across 529 locations in 40 cities in the U.S. and Canada, according to CBRE. The industry now spans roughly 70 million sq. ft. in North America, a roughly 2 percent share of the overall office market.
Now, as flex providers solidify their financial and strategic footing through partnerships and other moves, their offering is gaining new traction. CBRE surveys show that most large U.S. companies favor the short-term flexibility provided by flex space for a portion of their office portfolios as they adapt to new work styles, including hybrid work practices, as part of their return-to-the-office plans. Many flex providers have informally reported record sales volumes in recent months.
"The flex-office sector is weathering a challenging office market to emerge with a bright outlook," said Julie Whelan, CBRE's Global Head of Occupier Research. "Flex-space providers are well positioned to meet the need for companies to accommodate evolving employee work patterns while remaining nimble to change course if needed."
"The flex industry has evolved during the downturn, expanding its services to meet customers' changing needs," said Christelle Bron, Leader of CBRE's Americas Agile Real Estate Practice. "For instance, operators are offering on-demand and desk-pass services, which allow people to use their services whenever needed. These services are providing companies more flexibility in establishing remote work sites for employees who want additional options beyond the central office. We're also seeing an increase in demand for larger flexible office suites and enterprise offerings - entire sections or floorplans dedicated to individual companies on flex terms."
CBRE outlines four primary factors fueling demand for flex space going forward:
- Surveys show that employees desire flexibility and choice. Most respondents to a 2020 CBRE survey of employees across the globe said they want to work remotely a few days a week. And many would consider working in satellite offices closer to their homes a few days each week, which could include locations offered by flex providers.
- Large companies are considering increased use of flex space. A May 2021 survey by CBRE Occupancy Management of 42 client companies occupying a cumulative 325 million sq. ft. across the globe found that 56 percent are using flex space. Further, 43 percent anticipate their use of flex space will increase going forward.
- Small companies can use flex space to accommodate their space requirements more quickly, easily and efficiently, in many cases, than with traditional office space.
- The U.S. office market is showing signs of recovery. Office-leasing activity has picked up in recent months. The U.S. total of office space offered for sublease appears to have peaked in August. Increases in the average office-vacancy rate have diminished. A recovery in demand for office space will result in companies considering and comparing flex space and traditional space alike.
