HOUSTON – (Realty News Report) – Covid and co-working don’t sound compatible.
But as uncertainty hangs over 2021, co-working space, office suites, short-term leases and flexible office space option have a growing appeal to companies looking for workplace options in the new year.
In September, a CBRE survey of major companies across the globe found that 86 percent anticipate using flex space as a key part of their real estate strategies going forward. That was up from 73 percent in June. Additionally, 82 percent of the seventy-seven companies surveyed said they will favor buildings that include flex-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 flex options, as they offer fully built-out spaces, amenities, growth and contraction options and shorter lease terms than traditional leases. Most importantly, there are a wide variety of co-working options in nearly every major submarket throughout Houston from which to choose.”
As the coronavirus pandemic gripped the nation, some real estate experts and analysts speculated that the co-working and flex space sector would fade or die. After all, scientists at that time believed that Covid could be easily transmitted from touching workplace surfaces. And social distancing was identified as a mandatory safety precaution, which discouraged office space usage and created a surge in the work-from-home trend.
The pandemic did contribute to weakness in the co-working and flex space sector, along with the rest of the office market. Around the nation, 98 flex space providers (a total of 1.2 million SF) permanently closed in the first half of 2020. WeWork closed six locations totaling 456,860 SF in five markets, according to CBRE’s North America Flexible Office Market report. But the closures amounted to only 1 percent of the nation’s flex space inventory, CBRE reported.
However the flex space options – including shorter-term leases such as a two-year lease for a full floor – are poised for wider acceptance as the new year unfolds.
“Companies are planning to experiment much more broadly using workplace-as-a-service in 2021,” said Jamie Hodari, CEO of Industrious, as quoted by CBRE. “The question is how will they feel about the outcome of that experiment?” If the flex space experiment is “better than traditional modes of occupancy, it will transform commercial real estate faster than any one expects.”
The nation has 83.6 million SF of flex office space and 2.9 million SF is located in Houston, CBRE reports.
Regus, with 717,107 SF, is the largest flex space operator in Houston, followed by Boxer Workstyle Executive Suites. WeWork, Spaces and The Cannon, CBRE reports.
Supply growth has slowed, and various flex space operators are fine-tuning their portfolios, which likely will help the industry avoid a glut of unused space as demand has slowed.
“This downturn has sparked flex office to become a strong alternative to traditional leases for many office-using companies,” said Julie Whelan, CBRE Global Head of Occupier Research. “That is in large part because flex space can provide companies the agility to accommodate a workforce that values more choice over where and how they work.
“Additionally, the flex-office sector is growing increasingly resilient as more landlords operate their own flex space or form partnerships with flex operators for portions of their buildings,” she said. “Overall, this has created a more stable foundation for the sector’s continued growth.”
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 Whelen. Covid and Co-Working 2021 12-27-20.