All signs point to the flexible office market preparing to rebound. This is being echoed through surveys that have found office workers want to work from different locations post-pandemic, to WeWork finally on the path to going public through a SPAC deal.
It’s clear that demand for these offices has grown in recent months as occupiers pivot away from long-term leases and investments and seek out fully-equipped, sustainable flexible space options.
However, despite demand growing, there is still uncertainty about how much inventory the market can handle.
Currently, about 2% of office space is flexible, with that number expected to spike over the next decade. Along with thousands of companies popping up to accommodate this demand, landlords are also changing their tune in order to incorporate flex space in their buildings.
“The tenant wants less space, so landlords are going into the business either partnering with someone or doing their own flex office space,” said Robert Linton, a member and real estate practice group leader at Dykema Gossett.
This will likely come in the form of management agreements, rather than traditional fixed rent, where landlords receive a portion of the revenue flexible office operators receive. However, this model isn’t necessarily ideal for landlords.
Because of this, a bubble could form and lead to oversupply. Charlie Morris, practice leader for the flexible solutions team at Avison Young, believes that demand will outweigh current supply. But he also believes there “could be an oversaturation of the wrong product if not thought about it appropriately.”
