CBRE: Flex Office Sector to Emerge as a Key Component in Evolution of Workplaces

The pandemic-induced downturn that some feared would severely impact the flexible office space sector has instead landed flex space a prime role in future office strategies, according to a new report from CBRE. Flex space has rapidly established a foothold in Houston, expanding by 14.6 percent in the past year to total nearly 2.9 million sq. ft. in the metro.

CBRE’s annual flex-office report outlines how the once surging sector has held its own amid pandemic-related lockdowns and the resulting recession. Though the sector’s growth in square footage slowed to 7 percent in this year’s first half from 41 percent a year earlier, closures have been fewer than anticipated.

The outlook for flex office now is optimistic: A recent CBRE survey of 77 major companies across the globe found that 86 percent anticipate using flex space as a key part of their real estate strategies going forward. Additionally, 82 percent said they will favor buildings that include flex-space offerings.

“As Covid-19 vaccinations begin to roll out, companies are planning for their future office space needs,” said Kevin Kushner, executive vice president with CBRE in Houston. “We expect tenants with footprint requirements of 5,000 square feet and under, who may be unsure about their future needs, to consider flex options, as they offer fully built-out spaces, amenities, growth and contraction options and shorter lease terms than traditional leases. Most importantly, there are a wide variety of co-working options in nearly every major submarket throughout Houston from which to choose.”



CBRE defines flex-office space to include multiple formats of office space leased for shorter-than-traditional terms. That includes coworking, which often entails communal desks and common areas used by a flex operator’s occupants. But it also includes faster-growing models, such as private suites and enterprise offerings, which dedicate offices or entire floors for use by individual companies.

Multiple factors support the flex sector’s resiliency and continued growth:

• Demand is anticipated at healthy levels, as shown by responses in CBRE’s surveys of companies about incorporating flex space into their plans. Once those companies shift back into growth mode, flex space will offer them a nimble tool for expansion. It can also provide flexibility for individual employees through new subscription and on-demand formats that allow them to reserve workspace anywhere within a provider’s network on short notice. 
• The recession and pandemic spurred flex operators and their landlords to better cooperate to ensure the operators can survive and later thrive, sometimes through revised lease terms. That also has led to more momentum for flex-space models in which the landlord takes a greater role, either by partnering with the operator and sharing profits and losses, or by the landlord operating the flex space itself.
• Supply growth has slowed, and various operators are fine-tuning their portfolios, which likely will help the industry avoid a glut of unused space as demand has slowed.

“This downturn has sparked flex office to become a strong alternative to traditional leases for many office-using companies,” said Julie Whelan, CBRE Global Head of Occupier Research. “That is in large part because flex space can provide companies the agility to accommodate a workforce that values more choice over where and how they work.

“Additionally, the flex-office sector is growing increasingly resilient as more landlords operate their own flex space or form partnerships with flex operators for portions of their buildings,” she said. “Overall, this has created a more stable foundation for the sector’s continued growth.”

To download the full report, click here.