The Future of Real Estate

The Flex office industry has never been stronger

December 4, 2023

According to recent estimates, the global flexible workspace market is expected to reach $35.5 billion by 2030. Yet, following WeWork's US Chapter 11 filing, some are calling into question the resilience of the Flex industry. 

However, the case for WeWork's model is stronger than ever.

WeWork’s struggle is an indication of their own execution rather than of a lack of demand for their service. With the shift to hybrid working, this has never been greater. The sector has seen a dramatic shift, going from a lease-based industry, prone to boom-and-bust cycles, to one of immense flexibility. 

With an increased focus on de-risking portfolios and seeking out asset-light options, forward-thinking companies are benefiting from corporate real estate strategies that leverage flexible workspaces. These solutions allow businesses to reduce capital expenditure and operating costs while remaining agile in dynamic markets. Flexible workspace is a vital pillar of this model.

The resilience of the Flex workspace market

As workforces across the world shift to remote and hybrid working models, workplace strategies now require a high level of Flex and distribution from office space. In response to low office occupation numbers, organizations are seeking out agile real estate strategies that offer both flexibility and cost savings. Agile portfolios reduce capital expenditure while enabling organizations to remain flexible and responsive in dynamic markets, ultimately through utilizing the short-term commitments of flexible and on-demand workspace. 

Rather than maintaining large, underutilized offices, real estate decision makers are offering employees access to flexible workspace, on-demand, through platforms like Desana. Jamie Hodari, CEO and Co-Founder at our partner Industrious, emphasized this point in a recent LinkedIn post:

“The truth is, this is the period of highest demand for flex that we’ve ever seen, and nearly every trend in modern work is accelerating that demand."

In comparison to traditional commercial agreements, as well as cost savings and de-risking, the potential benefits offered by more dynamic workplace strategies include improved productivity levels and a boost to employee wellbeing. Companies are revolutionizing how they operate to meet employee demands for hybrid and remote working, while also reducing their capital expenditure. This is a must for many businesses looking at sustainable long-term growth.

Flex versus UnFlex

The bankruptcy of WeWork has been a significant setback for the company, but there is still strong demand for the type of innovative workspace model that they set out to build. WeWork was ahead of its time when it came to understanding future trends in work and how organizations can better scale their operations. Their model allowed companies to reduce their overhead costs while still having access to quality workspace solutions. It also provided greater flexibility so organizations could quickly downsize or expand. Unfortunately, despite these advantages, WeWork remained focused on long-term leases, rather than short-term sublets. This meant they were negatively impacted by COVID-19 when the market experienced a significant downturn.

Corporate downsizing has further strengthened the case for flexible workspaces. They are a practical solution for businesses looking to cut costs without sacrificing quality or growth potential. Companies can get access to all the resources they need on a pay-as-you-go basis with a flexible workspace provider. Demand for Flex will strengthen in comparison to “UnFlex” and WeWork's innovative approach will continue paving the way for those looking to capitalize on this shift.

De-risking portfolios and asset-light options

Flex workspaces offer an attractive asset-light option for companies. They can seize short-term opportunities without the constraint of long-term leases, thus reducing exposure to long-term liabilities.

Access to flexible workspaces can be scaled up or down depending on organizational needs. Increased agility is gained due to shorter lease terms while providing the ability to customize workspaces. Short-term solutions also allow rapid expansion into new markets or testing different strategies before committing capital. By taking advantage of these dynamic options, businesses can better manage their capital requirements and weather future market fluctuations.

The long-term lease, up to 20 or even 30 years, was once the go-to option for businesses. Now they’re seen as high-risk options that are inflexible to changing business needs, and a costly bid to get wrong. The trend towards less rigid real estate models is here to stay, and decision makers must recognize this shift if they want their business to remain competitive.

The future of long-term leases

Rather than flex workspace, the long-term lease is facing the highest threat of disruption, and the way asset owners navigate this challenge, especially in the midterm, could prove to be far more precarious than WeWork's situation. The traditional model of committing to a lengthy 15-year lease has been fundamentally challenged through innovations in technology, changing work dynamics, and the increasing popularity of flexible work arrangements. Asset owners find themselves at a crucial juncture where they must adapt to the evolving needs of tenants while protecting the stability and profitability of their investments. It involves reshaping the very foundation of commercial real estate strategies to align with the demands of a dynamic and uncertain future.

The rise of the agile portfolio

Agile real-estate strategies that rely on flexible workspaces as a central portfolio pillar can now embrace real estate solutions that fit their needs and remain responsive to changes in their environment. This shift also allows businesses to access global talent pools and become more efficient with their resources, quickly scaling up or down as necessary.

Unlike traditional leases, leveraging a unified workspace network shields companies from the risk of a single space operator closing. Alongside creating unprecedented economic efficiency, networks drive brand exposure to operators. They can instantly service organizations that they may not otherwise have had exposure to. A win for both parties that will further drive Flex market growth.

We're confident that flexibility, especially through platforms like Desana, will play an integral role in the real estate strategies of global employers to meet the needs of people, businesses, and the planet.