Dr. Gleb Tsipursky – The Office Whisperer
Nirit Cohen – WorkFutures
Angela Howard – Culture Expert
Drew Jones – Design & Innovation
Jonathan Price – CRE & Flex Expert
The total addressable market has shifted. Occupiers have changed how they work, and asset owners know they must evolve the product they offer.
Yet the capital system funding those buildings is stuck in another decade. Banks, appraisers, and credit committees still underwrite offices as if long-term leases are the only trustworthy signal of value.
It’s not that landlords lack imagination — it’s that their balance sheets aren’t allowed to have any.
The next frontier in workplace innovation won’t be designed by architects or tech founders. It will be dictated by lenders. Until the rules of capital catch up with the realities of work, the office reset will remain half-finished.
That tension is about to become acute. The industry is staring down a refinancing wall that will test not just building fundamentals, but the logic of the entire financing system.
The Debt Maturity Wall
More than $1.26 trillion in U.S. commercial-real-estate loans will come due by 2027, according to S&P Global Market Intelligence. Nearly $290 billion of that exposure sits in the office sector, per CRE Daily.
Refinancing those loans is getting harder: only 47 percent of maturing office loans were paid off in Q1 2024, reports Moody’s CRE. CBRE estimates a $52.9 billion funding gap through 2025.
When debt is due and valuations are under pressure, lenders crave predictability. Innovation — even the kind that might save a building — looks like a risk factor. Owners who want to pivot toward flexible space or short-term agreements often face an uncomfortable reality: their lenders won’t finance it.
The Valuation Bias: Why “Predictable” Isn’t What It Used to Be
The flexible-workspace category has been around since the 1960s, and it has demonstrated that short-term agreements can produce long-term stability. Across decades and multiple economic cycles, operators have delivered recurring revenue and resilient occupancy, defying the perception that flexibility equals volatility.
While often dismissed as “short-term,” renewal data reveals a far more predictable income stream — one that can rival spec suites and even mirror today’s compressing traditional lease terms, which now average about seven years nationwide (CBRE, U.S. Office Market Insights 2024).
Other operational real-estate models prove that stability doesn’t depend on term length. Hotels manage nightly fluctuations yet remain among the most financeable asset classes, their predictability strengthened by loyalty programs and dynamic pricing (SiteMinder, Hotel Industry Trends Report 2024).
Similarly, subscription-based sectors like gyms and fitness clubs operate on cancel-anytime memberships, yet investors value them for their reliable recurring income (Learn-Business.org, Subscription Economics 2024).
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The same principle should apply to flexible workspace. The data is already there; what’s missing is a model that translates it into something capital markets can underwrite. Owners, operators, appraisers, and lenders all have a role to play in building that framework. The challenge isn’t volatility — it’s translation: turning proven operating performance into a format capital markets can trust.
Even as the case for flexible revenue strengthens, higher interest rates have made lenders more cautious, not less. Borrowing is more expensive, valuations are lower, and that pressure is magnified across balance sheets. In a tighter credit environment, predictability is prized — and flexibility looks like risk.
The Owner’s Dilemma
Occupiers want agility — shorter terms, scalable footprints, and integrated services. Lenders still want ten-year leases with investment-grade tenants.
When a landlord proposes blending flexible memberships into a building’s income, underwriters often discount that revenue entirely. That can torpedo refinancing. So owners cling to the old model, even as demand migrates elsewhere.
It’s a vicious loop: lender conservatism breeds owner inertia, which pushes occupiers to bypass traditional landlords in favor of coworking operators, third places, and digital platforms.
Each defection chips away at the perceived value of the legacy office model.
Blueprint for a Capital-Market Reset
If product-market fit is about aligning with customer demand, capital-market fit is about aligning with financial reality.
Underwriting must evolve to treat flexible income streams as recurring, forecastable revenue rather than speculative cash flow. Appraisals should begin to reflect the optionality value of adaptable space — the embedded worth of agility in an unpredictable market.
Debt structures will need to adjust, too, combining stable core leases with flexible, performance-based components that reward activation and utilization.
Institutional investors could play a catalytic role, funding pilot programs that test new underwriting metrics or hybrid revenue models. Real estate doesn’t need to reinvent the wheel — it only needs to borrow lessons from sectors that have already priced and financed flexibility, from hotels to logistics to fintech.
As the Journal of Corporate Finance put it: “Financial flexibility is not a luxury — it’s a necessity.” That logic applies as much to real-estate portfolios as to balance sheets.
The Bottom Line
Changing space is hard. Changing how we price and finance space is harder — but that’s where the leverage is.
Until balance sheets evolve, buildings can’t. The next wave of workplace innovation won’t come from design trends or workplace tech; it will come from finance — from lenders and investors ready to underwrite flexibility instead of fearing it.
In my Allwork.Space | FUTURE OF WORK® series, I’ve explored the product-market misfit reshaping workspace. Now we’re taking a high-level look at how capital markets can become the solution, not the constraint.
If you’re a lender, investor, or credit strategist re-thinking how to underwrite flexibility, I’d love to hear your perspective.
