What’s Behind The Mad Rush For Flex Space

Companies are flocking to flex work space as they navigate a post-COVID return to work, in a move one CRE executive calls an “extraordinary rush” to the sector. 

Jamie Hodari, CEO of shared office provider Industrious, told CBRE’s Spencer Levy in a recent podcast that his company⁠—which took a big investment from CBRE last fall⁠—said the company hit three times their pre-COVID sales average in June. Monthly sales volume recovered from a COVID trough in April, and has been on a steady upward trajectory since. 

“I have to think we’ve hit the ceiling,” Hodari said. “There’s no way we’re going to hit four or five times, but you never know. But yes, we are in the heart of a moment right now where there’s an extraordinary rush to use flex. It’s pretty widely distributed. There are some cities that are lagging, but it’s happening all across the country. They are definitely buying flex in volumes that exceed what you saw pre COVID.”

New York is a standout location for Industrious: it has shot up to 97% occupied now, up from a COVID low of 40 to 45%, Hodari said. And that sell-up happened “very quickly,” he said. “It probably took eight weeks from trough to peak.”

So-called “outlier cities” like Bellevue and Austin “almost filled up overnight,” according to Hodari. Other midsize and large cities where companies “have always meant to have an office, but they never did” like Atlanta, Charlotte and even Dallas have all done well over the last year and a half. Meanwhile, cities like San Francisco are a struggle for shared office providers, which Hodari attributes to the fact that “you could just sleepwalk into a sublease for, you know, 70% off of pre-COVID rates.”

CBRE’s Christelle Bron says COVID “really activated” secondary and tertiary markets, which often offer employees a better lifestyle than gateway cities and allows companies to tap into a lower-cost labor pool.

“We see them saying, I want a broader network of employees, I want a broader reach and I’m going to use flex to test those markets,” Bron said. “I don’t have to make a decision. I can just go and test the market and see how it goes. So smaller offices, wider footprint, wider network, tons, tons of requests for international offices. Easily, a third of the requirements we get from our clients are for European, Asia, Latin markets.”