The Market Opportunity For Flex Space Ripens With The Decline Of Traditional Offices

The Market Opportunity For Flex Space Ripens With The Decline Of Traditional Offices

As the first quarter of 2022 ends, the market for flexible office space continues to show signs of positive development that also arose in 2021. On the occupier side, firms such as Amazon, Currys and Santander Bank have taken on new co-working space as part of hybrid working models. On the provider side, flex space firms have invested to differentiate and once again pursue expansion plans. Flex space provider The Instant Group, for example, is merging its digital searching platform with IWG, to enable users to search more than 30,000 locations across 175 countries. Newmark launched Upflex, a mobile app for users to search and book workplaces across thousands of properties in more than 70 countries. Moreover, flex office provider IndiQube announced that it plans to enter 15 new cities over the coming two years.

The various players in the flex space market – global providers, independent/local providers and large real estate services firms – are seeking bountiful premiums available in central urban centres. According to data from Workthere, Savills’ tech-enabled flex office brokerage service, flex space providers can fetch around $950 for each private office co-working desk space (compared to an industry average of around $400-500), in places such as New York and San Francisco. Other hotspots with sizable premiums include Austin, Berlin, London, Paris and Singapore. These players are also seeking to fill the gap left by the decline of the traditional, amenity-poor workplace, that is contributing to the $1.1 trillion obsolescence risk in the US office market.

Landlords still need to tread cautiously when moving into flex. The flex space model requires that a landlord provide space on flexible lease terms, they invest more on the fit-out and interior design than normal, then a flex space operator such as Industrious takes care of the day-to-day operations. A balance must be struck between minimizing tenant turnover and capitalizing on the reduced risk from having multiple tenants in a building or floor. The provision of tech-enabled flex space is therefore a ‘hotelification’ of the traditional office market and continues to present an attractive opportunity to firms with sizeable commercial real estate portfolios.

To find out more about the emerging and dynamic flex space technology market, look out for our upcoming report Smart Innovators: Hybrid Workplace Software, set to be published in April 2022.