Why Flexible Workspaces Will Dominate in 2021
Ever since COVID-19 made its American debut in March, corporate spaces across the country have gone dark.
Once-bustling floors are silent; workstations sit empty as employees log into their work emails from the isolation of their home offices or dining room tables. According to recently-published statistics from Stanford, a remarkable 42 percent of the US labor force is currently working from home full time; analysts for Global Workforce Analytics further posit that even by the end of 2021, 25 to 30 percent will still be signing in remotely.
The abandonment of America’s corporate offices is a necessary measure, one taken to lessen the spread of the coronavirus in close office quarters and preserve employee health — and productivity — as much as possible. But as remote work becomes ever-more entrenched in our working norms and high-profile companies allow their employees to leave office life behind permanently, commercial real estate professionals have found themselves facing a crucial question.
Will corporate offices become relics of the pre-COVID era?
It’s a complicated question. Right now, corporate real estate providers are all but scrambling to find ways to retrofit their assets into pandemic-proof zones.
Recent reporting from the New York Times found that developers have already begun brainstorming ways to protect commercial tenants from disease spread. Some of their more creative strategies include building with copper, which is less hospitable to germs, configuring ventilation systems downward from the ceiling instead of upward from the floor, and color-coding floors to facilitate a six-foot buffer between all employees.
Fear of disease transmission has even reversed widespread appreciation for open, collaborative workspaces and brought back the once-eschewed cubicle.
These strategies may eventually put tenants enough at ease to renew their long-term, multi-year contracts. But there may also be another solution for anxious corporate leaders and digital nomads: flexible workspaces.
Flexible workspaces are defined as office environments that are typically leased on a short-term basis and may support a variety of unrelated workers and businesses within the same space. Turning to this model might seem an odd solution at first — not only because short-term, mixed-use areas seem more prone to social mingling and unpredictable transmission, but also because flex operators were in a less-than-stellar position even before COVID-19.
According to an analysis published by the CBRE, commitments from flex operators dropped a stunning 32.1 percent year-over-year from Q1 2019 to Q1 2020. This plummet was partly because WeWork, a commercial real estate company with almost universal recognition and once-extensive reach, accounted for no commitments in the final quarter and was, at the time, embroiled in a leadership scandal.
As one writer for Globe Street explained of the matter, “WeWork’s retrenchment caused a deep drop in Q4 2019 commitments and other providers were expected to pick up the slack in Q1 2020. But such plans never materialized, stymied by the advent of COVID-19.”
But now, ironically, COVID-19 may provide flexible office providers an opportunity to reassert themselves. After all, they offer two perks that conventional, single-employer, long-lease spaces can’t — short-term commitments and the flexibility needed to adjust to an uncertain business landscape.
“In the medium to long term, demand for flex space will continue to be an important feature,” representatives for the commercial real estate services provider, JLL, wrote in a recent report.
“Many corporates will be anxious not to commit to big capex projects or make any firm employee headcount forecasts, which will strengthen demand for preconfigured space on flexible terms […] Businesses will have a greater need for flexible space to accommodate portfolio expansion and contraction along with crisis support to flex their space needs as necessary.”
It is worth noting, too, that the days of densely-packed offices may well be over. As employees grow accustomed to working at home, employers may find it more cost- and team-effective to maintain flex spaces for smaller groups of in-person employees, rather than a densely-packed office. As the popularity of remote working increases, flex office providers may also begin to design their spaces as places for safe, in-person collaboration, rather than for rote working.
This shift will be in flex providers’ favor. As analysts for a recent Research and Markets report noted, “The [flex] market is expected to rebound and make a gradual comeback from 2021 and grow at a healthy rate in the years ahead. Rebound is backed by the expectation that industry players would increase the adoption of alternative business models.”
So, does this mean that flexible workspace providers are on the up and up?
Not quite. While flexible office providers’ prospects are bright in the mid- and long-term, it would be a mistake to think that they aren’t in for a few rough months. Anxious over the potential for disease transmission, some commercial tenants may seek spaces with lower density.
This will be a frustrating change for flex providers, as they typically rely on high tenant attendance to balance the costs of maintaining their assets. Some providers may shed properties; others may choose to consolidate their holdings during the next few months.
That said, it seems likely that business leaders who are unwilling to commit to long-term office leases amidst the unpredictability of a pandemic will eventually turn to short-term providers to find more flexible, collaborative working spaces. The short-term stresses are real, but flex providers do have a reason for long-term optimism — and during a pandemic, what more could you reasonably hope for?
