As 2020 came to an end, CBRE – the largest commercial real estate services company in the world – published an article titled, ‘The End of the Beginning – North America Flexible Office Market in 2020.’
In what was such a tumultuous and unpredictable year for many in real estate, the article highlighted stats and trends that bring about a positive outlook for the future of the flexible office industry.
We first examine the growing desire among large, enterprise-level companies to utilize flexible workspaces to spread out teams, to cut costs, and to even allow employees to ‘work from anywhere.’
“A recent CBRE survey of 77 major companies across the globe found that 86 percent anticipate using flex space as a key part of their real estate strategies going forward,” writes CBRE.
These companies – who have hundreds, or even thousands, of employees – will be aiming to provide safe working options in 2021 and beyond.
While the strategy enacted will likely differ from company to company, it’s very promising to see a greater desire to utilize flex space.
CBRE writes, “Additionally, 82 percent said they will favor buildings that include flex-space offerings.”
“CBRE defines flex-office space to include multiple formats of office space leased for shorter-than-traditional terms,” they add.
“That includes coworking, which often entails communal desks and common areas used by a flex operator’s occupants. But it also includes faster-growing models, such as private suites and enterprise offerings, which dedicate offices or entire floors for use by individual companies.”
These, ‘buildings of the future’ could feature one or any of the alluded to combinations of flex space offerings that companies can utilize to fit their diverse flex space portfolio.
For companies who are uncertain in making a long-term decision on a brick-and-mortar office space, flex space is serving as a stop gap or short-term solution until the future is more certain.
CBRE’s Los Angeles-based Executive Vice President John Zanetos says, “As companies are developing a strategy for their occupancy in a post-pandemic world, flex office space is helping provide an interim solution while long-term plans are developed.”
“As corporate occupancy strategies consistently call for more flexibility and optionality, the flex office space sector will continue its growth.”
In particular, Zanetos referenced Los Angeles as a potential city where large companies are looking at the utilization of flex space.
“We definitely expect that here in the Greater LA area, which is the second-largest office market in the U.S,” said Zanetos. “It has a high concentration of tech and entertainment companies that tend to pair well with what flex spaces have to offer.”
While large markets like Los Angeles will likely see continued growth, it’s the secondary, tertiary that are also expected to see a boom in 2021.
“We continue to see an increase of flexible office offerings in primary and secondary markets,” said Tom Fuge, PON’s Managing Director of Real Estate.
Having seen this growing trend, PON has positioned itself to offer corporate clients flex space options in markets of all sizes, including primary, secondary, and even tertiary markets.
“We don’t anticipate that to stop anytime soon with the additional increase in demand from corporate occupiers. As office vacancy remains prevalent, more and more landlords are focusing on unique ways to incorporate more flexibility into their portfolio,” Tom added.
As we move into a new year, CBRE presents three main factors that support the flex office industry’s resiliency and continued growth.
First, CBRE writes, “Once … companies shift back into growth mode, flex space will offer them a nimble tool for expansion.”
Second, “The recession and pandemic spurred flex operators and their landlords to better cooperate to ensure the operators can survive and later thrive, sometimes through revised lease terms.”
And finally, “Supply growth has slowed, and various operators are fine-tuning their portfolios, which likely will help the industry avoid a glut of unused space as demand has slowed.”
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