The rise of remote work during COVID-19 has been detrimental to the future of office work — except in the line of flexible office space.
According to Vox technology offshoot Recode, in December 2020 “only a small portion of people have returned to the office. In Manhattan, the biggest office market, just 10 percent of office workers have come back, and some may never do so.”
Despite the decrease in new leases, the amount of leased flexible office space in the top 23 U.S. markets at the end of the third quarter this year has increased 2.5 percent from where it was at the end of 2019.
But what is “flexible office space”?
WeWork’s model is to lease space or entire buildings from landlords, redesign the space to look new and hip, and then sublease desks, offices, floors, or entire buildings to individuals and companies at a higher price.
Industrious shares the revenue of about 80% of its portfolio with the building owners instead of leasing. This model minimizes losses since the company pays less when they’re bringing in less revenue. Because of this, Industrious actually added one million square feet of new space in 2020 despite the pandemic lockdowns.
According to a survey from the real estate firm CBRE, about 86% of companies plan to rely on flexible space for their real estate strategies in the future. They’re also “highly likely to favor leasing in buildings that have flexible space offerings,” Recode reported.
Especially with the continuing lack of in-person business and the uncertainty that accompanies it, this type of office space is attractive to companies who are seeking hybrid models of office life or unwilling to commit to multi-year leases. It’s also beneficial to the individual remote employee seeking space to work without the potential distractions or unreliable network of their homes.
Jamie Hodari, CEO of Industrious, said in an interview with Commercial Observer that the demand for flexible office space is increasingly becoming a norm.
“I think behind closed doors, there are no skeptics left in the commercial real estate world in accepting the rising demand in what we do,” Hodari said. “They’ve coalesced around this idea that, in general, COVID-19 is going to accelerate the shift from the legacy way of doing commercial real estate to workplace as a service.”