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Flex Office Providers Like Their Long-Term Prospects, Despite Near-Term Turbulence

National  + Weekender  | 

In the near term, layoffs and furloughs at some of the leading flexible workspace providers suggest a sector going through retrenchment as stay-at-home orders keep office-using employees at home. Longer term, though, the outlook is more upbeat.

In the first of a series of sentiment surveys among flexible office providers around the world, Savills flexible office specialist Workthere found that 26% are optimistic about the prospects for the sector over the next three months, while 62% felt the same about the next 12 months. Conducted in mid-April, the survey also found that providers in North America are most optimistic, followed by those in Europe and then Asia.

“Prior to the onset of COVID-19, occupancy for providers in North America sat around 72% on average,” said Dom Harding, head of Workthere, Americas. “Survey respondents expected contract occupancy to be at 68% by the end of May. The survey also found that 31% of flexible office users in North America have asked for rent relief. Despite the current environment, a majority of providers felt optimistic towards the sector over the next 12 months.”

Globally, flexible office occupancy before COVID-19 was at an average of 83% and is expected to dip to 71% by June. Current enquiries for this type of space are at 20% of normal levels worldwide, with Asia seeing a greater proportion of clients not renewing contracts at 27%, compared with 13% in Europe and 12% in North America.

However, Asia has seen higher levels of inquiries so far in April at 33% of the normal levels. That compares to inquiry levels at 16% and 19% of the norm in Europe and North America respectively.

The study also showed that 33% of members globally have asked for some form of rent relief, a number that’s consistent across all regions. The most common form of relief granted by providers to members include deferring rent for a month and extending the licence agreements; allowing members to downsize space and a 20-50% rental discount for one month.

“The flex market is clearly exposed in the short-term to any market impacts such as what we are witnessing with COVID-19,” said Cal Lee, global head of Workthere. “It is at risk from companies that are not renewing contracts as they go into survival mode, and we expect that these figures will rise come the next survey in May as more members seek help putting further pressure on providers.”

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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).