Although the short-term lease nature of flexible workspace firms has caused a great deal of pain over the past year, they could also offer the best solution for recovery.
IWG cut down on its footprint due to decreased demand and low occupancy. This led to major revenue losses, particularly during the second half of 2020.
Office rents are looking grim too, with the Royal Institution of Chartered Surveyors fourth quarter commercial market survey expecting rents to fall over the next 12 months.
However, landlord CLS has reported that it had a growth in estimated rental values across its portfolio in 2020.
Still, vacancy rates grew to 5% by the end of December, which is up 4.3% of the previous year.
“I don’t think we’re going to see that much improvement until June, when lockdown restrictions [will be] hopefully disappearing,” said Fredrik Widlund, CEO of CLS.
While vaccines are being distributed worldwide, working from home may still remain a part of every day operations. With large companies like BP announcing they would shift to hybrid work arrangements, flexible workspace firms could serve as a solution as more people want a workplace closer to home.
In fact, deals for offices in New York City fell by 30%, but rose over 40% in southern Connecticut.
Still, it is untelling whether IWG has the liquidity to take advantage of this opportunity in the long term. With debt facilities totaling £802 million by the end of 2020, lease liabilities and uncertain demand could pose a risk for the company.
