Flex-Office Sector Poised For Growth
Photo credit: Mikhail Nilov
CBRE, Dallas, said the flex-office sector is poised to benefit as companies adapt their office portfolios to accommodate more flexible work practices.
“The flex-office sector is weathering a challenging office market to emerge with a bright outlook,” said Julie Whelan, CBRE 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.”
Whelan noted 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 square feet of flex space in 40 cities in the U.S. and Canada. The industry now spans roughly 70 million square feet in North America, a just under 2 percent 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 said. 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 such as hybrid work practices as part of their return-to-the-office plans. Many flex providers informally reported record sales volumes in recent months, the report said.
CBRE outlined four primary factors fueling demand for flex office space going forward:
–Surveys show employees desire flexibility and choice. Most respondents to a 2020 CBRE survey of employees said they want to work remotely a few days a week. Many would consider working in satellite offices closer to their homes a few days each week, which could include locations offered by flex providers, CBRE said.
–Large companies are considering increased use of flex space. In May, CBRE surveyed 42 companies occupying a cumulative 325 million square feet and found 56 percent are using flex space. Further, 43 percent said they anticipate their flex space usage will increase going forward.
–Small companies can use flex space to accommodate their space requirements more quickly, easily and efficiently than with traditional office space.
–The entire U.S. office market is showing signs of recovery. Office-leasing activity picked up in recent months and increases in the average office-vacancy rate have diminished. Recovering demand for office space will result in companies considering and comparing flex space and traditional space alike, CBRE said.
“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.”
Bron noted she is also seeing an increase in demand for larger flexible office suites and enterprise offerings, including entire sections or floorplans dedicated to individual companies on flex terms.