Flexspace to Grow Amid Post-Pandemic Drop in Office Demand

Companies will likely continue to offer their employees greater choice in where they work as 2021, and flexspace will be a part of their offerings, according to a Colliers International report. This will give a boost to this office format, however much of the growth will occur outside the list of usual CBD suspects, as some markets are already feeling the supply pinch from a lack of flex workspaces outside of downtown locations. 

“As occupiers continue to seek a range of geographic locations to solve for a distributed workforce there is a substantial deficit of supply in suburban areas, secondary cities, commuter towns and emerging markets,” the Colliers report states. “2021 will be the year that non-CBD flexible workspace supply increases dramatically.”

The firm predicts this increased supply will be delivered by both existing operators and new entrants, as well as through repositioned retail and hotel assets. And while institutional office owners with well-built-out portfolios may be able to better serve occupiers’ far-flung location needs these days, there are no perfect solutions. Flex workspace providers with a diverse network of locations are a nice stopgap, as are hotels or malls looking to convert vacant spaces may present as reliable options—but “no one of these stakeholders will be able to solve this demand alone,” Colliers says.

Tech will also be king in 2021 as occupiers look to execute on new occupancy strategies, with demand aggregator platforms like NeoNomad, Liquid Space, DeskPass, Desana, WorkBuddy, FlySpaces Passport and Switch leading the way. The firm expects partnerships between landlords and these providers to tick up this year as well, in preparation for an eventual return-to-normal post-COVID and at a time when office demand is predicted to decrease, by some estimates, by up to 15%.

“It would not be a stretch to imagine several asset owners acquiring flexible workspace operators in order to solve for occupier demand for flexibility and buy-in expertise, together with creating a more varied work from anywhere platform for their occupiers,” the report states. It notes that traditional CRE service providers with FM teams may also seek to boost their own suite of offerings post-pandemic—a trend led by CBRE with Hana, JLL with Civis, and Cushman & Wakefield with Indego.

From a valuation perspective, the report notes that lenders have yet to reach consensus on how to value flexible workspace income streams, but predicts lenders and valuers will be forced to adapt and establish those guidelines this year.

“Over 2021 we will begin to see the true impact of the pandemic and start to make sense of what it’s long lasting impact will be,” the report states. “There are signs of optimism for the flexible workspace sector, underpinned by occupiers looking to reduce risk, elevate employee experience and outsource workspace delivery.”