Coworking And Flex Office Providers Say They're Past The Pandemic And Set To Expand…
Government officials across the U.S. are lifting mask mandates, a long-awaited sign that companies can start to think seriously about returning workers to their offices. But it isn't as if nothing has changed, and many expect new ways of working will replace the old.
That may mean good times ahead for flex office providers.
“The dark cloud of the pandemic is starting to blow over a little,” said Joe Brady, CEO of the Americas at flexible workspace company The Instant Group. “But no one believes there’s going to be a return to pre-pandemic behavior.”
Brady said he expects many employees will increasingly make clear they want to keep working from home, at least for portions of the week. When they do return to their offices, they will want more amenities and a wide range of spaces that can offer privacy if needed. And if landlords and employers want to entice their workers back, they will have to follow through and provide what they want.
“The pandemic made a tectonic shift,” Brady said, adding more power now resides with workers. “[Employees] can demand that one day they are going to go to an office, one day they will go to a WeWork and one day they can work from home. Employees are going to vote with their feet about where they choose to work.”
That isn't a recipe for business as usual, he added. Companies will experiment with various hybrid strategies and work schedules, and it may take time to hit the right mix of spaces, from private cubbyholes to high-tech conference centers that can host whole workforces. That could mean a burst of demand throughout 2022 for coworking and flex office spaces, especially for small firms just returning to the office and large firms looking to establish offices in new markets.
“No one is going to sign a 10-year lease right now,” Brady said. “But there are going to be a lot of cases where companies test out a flex office space for six months.”
Flex office and coworking providers typically rent out large spaces and then divide it into small portions for companies and individuals who buy memberships, sharing the amenities with other users.
The industry turnaround started in 2021 after a rapid dip that saw nearly 25% of such locations in North America shuttered between the start of the pandemic and Q2 2021, according to Upsuite, a Denver-based flex office data and analysis platform. But the pain wasn't felt equally.
“Providers who had been bullish on rapid expansion pre-pandemic faced challenges that were well-reported; however, we’ve found that the smaller operators suffered the most,” Brady said. “In Chicago, which mirrors much of the U.S., small operators saw locations decline by 19% while the top 20 operators actually expanded their market share.”
The bleeding stopped in Q3. In the last few months of the year, demand began soaring, even during the rise of the omicron variant, according to Upsuite.
North American flex and coworking spaces saw demand increase 40% from Q3 2021 to Q4 2021, Upsuite found, a 50% increase from Q1 2021 and up 26% from pre-coronavirus levels recorded for Q1 2020. Metro areas such as Atlanta, Houston and Los Angeles are leading the demand surges, with increases of at least 91% in Q4 2021.
Rents and inventory also started growing again, Upsuite added. The average asking price for each flex seat grew 2.5% between Q3 2021 and Q4 2021, the biggest jump since the pandemic began and 5.8% higher in Q4 2021 compared to Q1 2020.
“The pandemic was a major crisis for the industry,” Upsuite noted in the Q4 2021 report. “But with recovery well under way, operators should be scouting new locations and planning for growth. In short, the operators who survived should not waste a crisis – they should accelerate out of it.”
Some industry leaders say they are ready to do just that.
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Wenston DeSue is a realtor, organizational consultant, design, construct, build expert and developmental networker. Real estate is the business of exchange and affects every person on the planet. Real estate on all levels represents resources, access, purpose and often times, power. These articles represent aspects that affect the business of real estate.
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