Cushman & Wakefield proclaimed that 2018 was the “Year of the Coworking/Flex Office Sector” after leasing activity from operators grew by 200%.
The future looked promising for the blossoming industry, but the pandemic has led millions of people to walk away from memberships and work out of their homes.
While it would be simple to pack up their bags and call it quits, flexible office firms are taking this time to reevaluate their portfolio and business operations.
According to Newmark Knight Frank’s “3Q 2020 Manhattan Office Market Report,” 23 locations equating 1.2 million square feet in the borough had closed since the start of the pandemic. The report also anticipates an additional 1.1 million square feet of subleased space will come back to Manhattan’s market due to coworking closures.
For instance, Regus has put over 100 of its locations across the country into bankruptcy, but has also extended one of its leases on Madison Avenue.
“Regus made it clear that they were identifying — as all the operators in their sector are — which are the successful locations and which aren’t as successful,” said Michael Cohen, President at Colliers International New York who represented Regus in the deal.
According to Dror Poleg, former adviser to coworking firm Breather, the trouble began when operators expanded too quickly instead of taking time to nurture the business.
Now, the pandemic has led coworking companies to completely uproot their business model to focus on what is essential: providing a safe office for workers. This means cutting down on unnecessary locations that are not working, as well as renegotiating leases.