Co-Working Occupancy Slides Despite Long-Term Optimism

The United States’ ongoing battle with the coronavirus has slashed flexible offices’ occupancy rates and decreased short-term optimism in the industry, according to a new survey. However, their pessimism wasn’t mirrored across the globe.

The third “Global Flexible Office Sentiment Survey” was released by Workthere, an online platform that lists co-working providers in various international and U.S. markets. Workthere surveyed 92 flexible offices located in 12 countries, including the United States, Canada, France, Germany and Hong Kong.

Conducted in July, global optimism toward the sector in the next three months was down slightly from 42% in May to 40%. However, only 30% of North American flex office providers had short-term optimism in the market, compared to 59% in May, Workthere found. The decline in optimism is potentially driven by an uptick in members seeking rent relief, up to 39% compared to 33% in May and more members not renewing contracts (from 19% in May to 28% in August’s report), according to Workthere.

Indeed, more North America-based flexible offices slashed rent or allowed members to downsize their space. Plus, providers in Canada and the United States expected occupancy in their offices to be 49% at the end of August, compared to 80% pre-pandemic. But providers weren’t entirely pessimistic.

Over 60% of flexible office providers were optimistic about the sector over the long term/next 12 months. North America-based providers’ long-term optimism could be fueled by an uptick in space inquiries across the United States and Canada, which jumped to 37% of normal levels, compared to just 19% in May. Globally, however, the long-term outlook was more positive. Nearly 80% of respondents reported they were optimistic about the flex market over the long term.

Will the Sector Survive/?

While the failed IPO launch of WeWork and its shrinking real estate grabbed headlines, COVID-19 dealt a significant blow to the entire co-working market. To be sure, COVID-19 also dismantled traditional U.S. office occupancy levels to record lows.

However, CBRE occupier research leader Julie Whelan argued the co-working market will emerge stronger, partially because it has already weathered the worst-case scenario. Now, companies will be more interested in the financial flexibility that co-working spaces provide, she said.

A recent report by Cushman & Wakefield also predicted co-working spaces will re-emerge as a key workplace option. Notably, some companies and workers will find a conveniently located co-working space appealing. Plus, a post-pandemic suburban “renaissance” may also benefit co-working locations outside of downtown, according to Cushman & Wakefield.