HOUSTON – (Realty News Report) – At first glance, COVID-19 and co-working might seem incompatible. Yet as uncertainty lingers into 2021, co-working spaces, office suites, short-term leases and other flexible office options are becoming increasingly attractive to companies seeking adaptable workplace solutions.
In September, a CBRE survey of major corporations worldwide found that 86 percent expect to use flexible space as a core component of their real estate strategies going forward, up from 73 percent in June. Additionally, 82 percent of the 77 companies surveyed said they prefer buildings that include flexible space offerings.
“As COVID-19 vaccinations begin to roll out, companies are planning for their future office space needs,” said Kevin Kushner, executive vice president with CBRE in Houston. “We expect tenants with footprint requirements of 5,000 square feet and under—who may be unsure about their future needs—to consider flexible options. These solutions offer fully built-out spaces, amenities, options for expansion or contraction, and shorter lease terms than traditional leases. Most importantly, there are a wide variety of co-working choices in nearly every major submarket throughout Houston.”
When the coronavirus pandemic first spread across the nation, some analysts predicted the co-working and flexible space sector might decline sharply. Early concerns about surface transmission and the need for social distancing discouraged office use and accelerated remote work.
The pandemic did cause weakness across the office market, including the flexible sector. Nationwide, 98 flexible space providers—totaling roughly 1.2 million square feet—closed permanently in the first half of 2020. WeWork shuttered six locations totaling 456,860 square feet across five markets, according to CBRE’s North America Flexible Office Market report. Still, those closures represented only about 1 percent of the nation’s flexible space inventory.
Despite these setbacks, flexible options—such as two-year leases for full floors or other short-term arrangements—are positioned for broader acceptance as the new year progresses.
“Companies are planning to experiment much more broadly with workplace-as-a-service in 2021,” said Jamie Hodari, CEO of Industrious, as quoted by CBRE. “The question is how they will feel about the outcome of that experiment. If flexible arrangements prove better than traditional modes of occupancy, they could transform commercial real estate faster than many expect.”
Nationally there are 83.6 million square feet of flexible office space, with 2.9 million square feet located in Houston, CBRE reports.
In Houston, Regus (717,107 square feet) is the largest flexible space operator, followed by Boxer Workstyle Executive Suites, with notable presences from WeWork, Spaces and The Cannon, according to CBRE.
Supply growth in the flexible sector has slowed, and many operators are refining their portfolios. Those adjustments should help the industry avoid a surplus of underused space as demand softens.
“This downturn has prompted flexible office to emerge as a strong alternative to traditional leases for many office-using companies,” said Julie Whelan, CBRE Global Head of Occupier Research. “Flexible space gives companies the agility to support a workforce that values more choice about where and how they work.
“Furthermore, the sector is becoming more resilient as landlords either operate their own flexible space or partner with operators to manage portions of their buildings,” she added. “Together, these trends create a more stable foundation for continued growth in the flexible office market.”
Dec. 27, 2020 Realty News Report Copyright 2020
Caption: Downtown Houston. Photo credit: Ralph Bivins, Realty News Report. Copyright 2020
File: Covid and Co-Working 2021
File: (2) CBRE North America Flexible Office Market 2020. Covid and Co-Working 2021. Kevin Kushner. Julie Whelan. Covid and Co-Working 2021 12-27-20.