Flex Office Becomes a Strategic Solution for Many Companies

This year’s downturn resulted in flex office becoming a strong alternative to traditional leases for many office-using companies requiring agility. As a result, flexible office space is no longer viewed as a niche sector but as a strategic solution for a broad range of companies, according to a new report by CBRE.

As this shift unfolds, new models are beginning to emerge. Alliances between flexible office operators and building owners have formed, new markets are being explored and new business structures are being developed to engage office users.

In the first half of 2020, only 1% of flex space was closed from an operational standpoint. The sector held its own amid pandemic-related lockdowns and the resulting recession. Though the sector’s annual growth in square footage slowed to 7% as of the second quarter from 41% in the prior year, closures have been fewer than anticipated. This is due to several factors including those enterprise tenants that moved to short-term lease renewals as future headcount requirements remain uncertain.

CBRE makes the case that the outlook for flex office now is optimistic: Its recent survey of 77 major international companies found that 86% anticipate using flex space as a key part of real estate strategies going forward. Additionally, 82% favor buildings that include flex-space offerings.

Demand is anticipated at healthy levels, as shown by responses in CBRE’s surveys of companies about incorporating flex space into planning. Once those companies shift back into growth mode, flex space will offer a nimble tool for expansion.

It can also provide flexibility for individual employees through new subscription and on-demand formats that allow them to reserve workspace anywhere within a provider’s network on short notice. Building owners are increasingly offering flexible office options in the form of owner-operated space or pre-built suites, sometimes using flex office providers to operate the space on their behalf.

According to CBRE’s 2020 global occupier sentiment survey fall update, 67% anticipate all employees having access to the office by mid-2021. Of course, this sentiment depends heavily on virus transmission and health considerations as the re-entry date nears.

Occupiers and employees expect an office option. An overwhelming 81% of respondents expect at least half of workforces to be office-based in the future and 73% support these office-based employees in balancing time between the office, home and “third places”.

Transformation towards collaborative design will accelerate. As the role of the office evolves to favor teamwork over individual work, design will likely follow suit, specifically, 70% are planning to operate in a significantly “free address” environment to support a more mobile workforce.

Focus on optimization has intensified and 60% are aggressively pursuing consolidation strategies, while 70% have expansion plans on hold (optimizing existing portfolios has become a focus in light of uncertainty). Urban core remains important, while hub-and-spoke strategies vary by market and sector.

Flexible solutions are attracting greater interest and 56% are considering more use of flexible office space due to continued uncertainty. Meanwhile, 82% indicate flexibility is a desired attribute as buildings are selected to lease in the future.

Building owners and companies leasing space have been forced to view flexible office options with a new eye, two executives in CBRE’s flexible office subsidiary, Hana, said during a podcast earlier this year. Georgia Collins, executive vice president of client solutions for Hana, said during The Weekly Take podcast that while some organizations have embraced flexible arrangements for a decade or two, other parts of the industry have been reluctant to test it, until now.

The upheaval of 2020 created a more stable foundation for flex office’s continued growth. This will lead to the sector’s evolution to a more mature state in years to come.