Market perception of flex office space has dramatically improved this year, after the pandemic forced a rout that saw a retreat from the sector.
A new report from JLL on the state of flex space globally notes that while investors have typically employed a more cautious approach to flex space, the share prices of publicly traded flex operators like IWG have climbed since the pandemic's early days. (KKR and TIGA's majority stake in TEC is one such example.) And the sector's supply-demand drivers are pointing to even further growth post-COVID.
Historically, flex tenancies have created cap rate premiums relative to comparable assets in more traditional segments of the economy when comprising a large share of rentable building area, according to JLL. And in past down cycles, operators have turned to bankruptcy protection, further driving investors away from the asset type.
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