Flex Office's Supply-Demand Drivers Point to Further Growth

The flex office industry is poised for growth, says CBRE in a new report.

The optimism comes as providers reduced their inventory during the pandemic and most large US companies responding to CBRE surveys have said they favor the short-term flexibility provided by flex space for a portion of their office portfolios as they adapt to new work styles, including hybrid work practices, as part of their return-to-the-office plans.

Some companies are seeking out larger flexible office suites and enterprise offerings—entire sections or floorplans dedicated to individual companies on flex terms. These companies are responding to the strong desire of employees to retain a significant level of flexibility in how and where they work in a post-pandemic world. 

CBRE also sees flex offices attractive to small companies since they can use it to accommodate space requirements more quickly, easily, and efficiently, in many cases, than with traditional office space.

At the same time, flex office providers have made their offerings more attractive with on-demand and desk-pass services, which allow people to use their services whenever needed.

Supply, meanwhile, has fallen during the pandemic era.

During the last year, the flex office companies dropped 10.1 million square feet with Manhattan, San Francisco, Los Angeles and Washington, D.C. accounting for 50% of the reduced flex supply. The providers now hold 70 million square feet in 529 locations, about 2% of the office market in North America.

“Flex-space providers are well positioned to meet the need for companies to accommodate evolving employee work patterns while remaining nimble to change course if needed,” said Julie Whelan, CBRE’s Global Head of Occupier Research.

A May survey by her unit reported 42 client companies occupying a cumulative 325 million square feet across the globe found that 56% are using flex space. And 43% anticipated increasing use going forward.

But even if the demand is clear and supply has moderated, there are some that say it is still debatable how much inventory the market can support. “Anyone who says they know exactly what will transpire is lying through their teeth,” Charlie Morris, practice leader for the flexible solutions team at Avison Young, told GlobeSt.com. “Every single company is different.”

There are a lot of players, including “thousands of different product solutions companies,” Morris says.

Morris sees a bifurcated immediate future. “I think that demand is going to outweigh the viable supply,” he says. “There’s a lot of supply out there and more coming.”

However, he thinks there “could be an oversaturation of the wrong product if not thought about it appropriately.”