Demand for Flex Space is On the Rise
We feature another article about the future of the company office. Olivia Lueckemeyer from Bisnow.com discusses how the demand for flex space in the office is on the rise. Some stats from the article:
- There was historical negative net absorption, but flexible office space market has only contracted by under 9% in the year leading up to Q3 2021.
- Close to 20% of enterprise companies of more than 10,000 employees said flex space could eventually comprise more than 50% of their portfolio.
- 80% of large employers indicated a desire for shared meeting space and another 75% saying they want flexible open space within their buildings.
- Continued job growth paired with a need for space that aligns with hybrid work will spur more demand for this type of product in 2022.
From this article, it seems that flex space will be an
important planning factor for commercial office space in the future. Our experts understand how influential the
right work environment can be and will work with you to develop a space that
enhances productivity and innovation. Whether optimizing your current
workspace, creating a new design, or helping with relocation and
decommissioning strategies, we’re committed to enhancing the way you work.
If I can help you discuss flex space opportunities for your
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Demand For Flex Space On The Rise As
Companies Contemplate Return-To-Office Plans
February 8, 2022 Olivia
Lueckemeyer, Bisnow Dallas-Fort Worth
More companies are expected to add flex space to their
office portfolios in 2022 as employers seek to accommodate historic shifts
in the way people work.
In a report released Feb. 7, CBRE said the North
American flex market has slimmed down after rapidly expanding in 2018 and 2019.
Since mid-2020, 144 flex office providers have reduced their footprint by about
12M SF across 669 properties covering 42 markets, per CBRE’s findings.
“The office market was extremely affected throughout the
pandemic,” Julie Whelan, global head of occupier thought leadership for
CBRE, said during a Feb. 7 media briefing. “We saw historical negative net
absorption, yet the flexible office space market has only contracted by under
9% in the year leading up to Q3 2021, which is pretty resilient in our eyes.”
Whelan said Manhattan, San Francisco and Los Angeles —
markets that had the most flex space as a percentage of overall office
inventory pre-pandemic — are the areas where most of this contraction has
occurred.
“It’s no wonder that those markets took the opportunity to
really right-size throughout the pandemic after such intense growth leading up
to the pandemic,” she said, noting that suburban markets across the board lost
the least amount of inventory.
Markets with the most flex space as of Q3 2021 include
Manhattan, Dallas-Fort Worth and Chicago. Those with the most flex space as a
percentage of their overall portfolio include Miami, Manhattan and San
Francisco, according to the report.
Despite an industry-wide contraction, some operators grew
their footprint over the pandemic. Companies like Industrious, colab at
Bell Works, Common Desk, Venture X and The Mark all expanded
between 2020 and 2021.
“The reason there are still occupiers expanding in the
market even during a period when other providers were perhaps contracting is
because there is a lot of interest by tenants, especially enterprise tenants,
in this tranche of space,” Whelan said.
A 2021 occupier sentiment survey by CBRE revealed that close
to 20% of enterprise companies of more than 10,000 employees said flex space
could eventually comprise more than 50% of their portfolio. Interest from
companies across the board is going to challenge providers to meet anticipated
demand, Whelan said.
“When you look at the size of the flex market being generally
under 2% nationally … and you look at this type of growth from small, medium
and even large companies looking to put into flex, that is going to be quite a
tailwind for a lot of these flex providers to make sure they have the right
amount of flex space in the right place at the right time,” she said.
Whelan said run-of-the-mill offerings, like access to transit or on-site gyms, are now seen as table stakes for any quality building. What differentiates one quality building over another are flexible offerings, with close to 80% of large employers indicating a desire for shared meeting space and another 75% saying they want flexible open space within their buildings, according to the occupier sentiment survey.
Continued job growth paired with a need for space that
aligns with hybrid work will spur more demand for this type of product in 2022,
Whelan said. Large companies are forming their return to office plans, and
incorporating flex is now seen as a move that supports employee choice, said
Brandon Forde, CBRE’s president of client solutions.
“All the big companies are telling us they are going to use
flex more going forward, and they are going to use flex first as they come
back,” he said.
There are still challenges facing the flex space, however,
especially for large users. Factors like inexperience with the flex model,
technological shortcomings and privacy requirements among enterprise companies
could hinder the market moving forward.
Still, CBRE predicts that between 13% and 18% of the nation’s
office portfolio will be penetrated by flex space in 2030. The lower end of
that scale would require flex to grow by more than 500M SF off today’s base of
80M SF, Whelan said.
“That’s a lot, and it means there has to be momentum in
attracting clients and enterprise users to this pace, and there will have to be
traditional leases that convert over to flex,” she said. “We have the ability
to do that now that we are in such a transformative environment in the open
office market overall.”
End of Article
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