Key Takeaways
Despite challenges in the last few years, the number of flexible office (flex) spaces in the U.S. has increased. Based on recent data from Coworking Café, the number of flex spaces in the U.S. increased 6% quarter-over-quarter (QOQ) in the first quarter of 20241. Additionally, the total size of the flex market, by square feet (sf), grew by 10% QOQ in the first quarter of 2024 after falling 3% in the fourth quarter of 2023.
Cushman & Wakefield data shows that leases signed between 2020-2024 by the top 10 largest (by square footage) flex office providers differ significantly from their pre-pandemic activity in both quantity and size. A total of 720 deals were signed between 2015-2019, totaling over 29 million square feet (msf). This fell to 130 deals between 2020-2024, totaling 3 msf. The average lease size from 2015-2019 was just under 41,000 sf, but that number dropped by nearly half to 24,000 sf from 2020-2024. Lease length also differs when comparing the two periods. Leases averaged 11 years between 2015-2019; that fell to 8 years from 2020-2024. Additionally, two-thirds of deals signed between 2015-2020 were for 11 years or more, and that share fell to 45% from 2020-2024.
To address demand, the top ten providers scaled up their platforms from 2015-2020, and they have spent the last four and a half years right sizing their portfolios to meet their occupier’s evolving needs. The flex sector has faced many headwinds, from economic turbulence to major provider defaults, yet it continues to grow due to flex providers’ ability to meet the diverse needs of occupiers and their employees with people-focused solutions, adaptable workspaces, amenities and flexible lease terms.
People Focused Solutions
Occupiers and their employees choose flex solutions primarily for the quality of service. In other words, it is first and foremost about their people. Various data sources highlight the people-centered benefits of flex solutions, including a survey by The Instant Group that found the main reason customers choose flex is “greater productivity due to multiple work environments,” followed by “friendly staff’ and “fostering a sense of community.” This aligns with Deskmag’s recent report, which found that “sense of community” was among the top three expectations providers had for their business in 2023.2 Cushman & Wakefield’s Experience per Square Foot™ survey revealed that employees identify the top three purposes of the office as people focused. Employees value a sense of community and connection as key motivators to go to the office. Flex solutions, which provide spaces tailored to individual needs, play a crucial role in many occupiers’ ongoing space strategies for their employees.
Spaces for How People Work
While employees value collaboration and spaces that promote socialization, most employees need space to complete individual work throughout the day. Research by Cushman & Wakefield’s Total Workplace team found that office workers spend most of their time on individual work and virtual meetings.3 Based on Cushman & Wakefield’s Experience per Square Foot™ survey, employees spend 54% of their time on individual work and 21% on virtual meetings or calls. Flexible offices provide spaces designed to accommodate the different daily activities of employees, including spaces for individual work and virtual calls, as well as areas for team meetings, collaboration and socializing. Flex providers are adept at navigating changing employee workplace trends and tailoring solutions that best serve different work styles. Providers routinely implement new and innovative ideas to support an occupier’s specific space strategies, such as creating custom spaces, deploying technology solutions, and adding new furniture. Additionally, flex providers routinely create communal events like speaker sessions, networking opportunities and wellness workshops to enhance the employee experience.
Tailored Solutions for Varied Workforce Requirements
The popularity of hybrid work has driven the demand for flex space solutions, especially for occupiers with distributed workforces who need spaces outside traditional office markets. According to a recent amenities analysis by The Instant Group,4 the top searched amenity over the last five years was “furnished.” However, in 2023, this shifted to “24-hour access,” reflecting the changing work styles and evolution of the typical workday. Today’s employees have more flexibility, often working at different times and in various locations. The rise in parking as a preferred amenity reflects in increasing preference to work close to home. According to Gallup data, commuting time increased by 10% between 2006 and 2019, making long commutes a significant reason employees resist returning to the office full time and favor easily accessible and convenient locations.5 Flex offices meet this employee preference by providing workspaces closer to employees’ homes, with the amenities they need.
Flexible Terms Focused on Occupier Needs
The Instant Group analysis revealed that “flexible term” is a top-searched amenity, highlighting the rising popularity of flexible leases from flex providers. Occupiers increasingly seek flexible leases that fit with their evolving space strategies amid continuing uncertainty around future workforce operations. Flexible leases also support potential cost-cutting and cost-containment strategies by allowing occupiers to select office space à la carte. Flexible terms are also beneficial to occupiers in scenarios where a location may need to be shuttered, but employees still require some access to office space. In these cases, flex solutions can support the needs of dispersed office users by providing the occupier with flexible terms and multiple types of office space.
Continued Growth
In a recent CoreNet and Cushman & Wakefield survey of office occupiers, most felt that their workforce will increasingly utilize flexible office solutions on a regular basis. Survey respondents indicated that about 12% of their global workforce used coworking spaces five years ago. Today, that percentage has increased to 16%, and it is expected to grow to 20% by 2029. Occupier expectations for flexible office solutions vary based on their needs but usually include the ability to make short-term decisions, mitigate risks in an evolving environment, and respond to changing employee culture and habits. The flex sector’s ability to meet these needs is why occupiers continue to choose flexible office solutions.
1 https://www.coworkingcafe.com/blog/national-coworking-report/
2 https://deskmag.com/en/coworking-spaces/profitability-and-margins-2023-global-coworking-flexible-workspaces-market-survey-results
3 Experience Per Square FootTM Insights
4 https://www.theinstantgroup.com/en-us/breakthrough-insights/research-articles/most-searched-for-amenity-round-the-clock-availability/
5 https://www.gallup.com/workplace/474482/why-commute.aspx
