Phoenix among markets with fastest flex office space expansion in the U.S.
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 office space has grown rapidly as of late in Phoenix, expanding by 13.7 percent in the past year.
CBRE’s annual flex office space report outlines how the once surging sector has held its own amid pandemic-related lockdowns and the resulting recession. Though the sector’s annual growth in square footage slowed to 7 percent as of the second quarter from 41 percent in the prior year, 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.
Flex office comprises 1.4 percent of Phoenix’s overall office market.
“We believe corporations will use their workspace as a tool to cultivate an employee experience that can’t be replicated at home,” said Phoenix-based Charlie von Arentschildt. “More so than ever, employers will be looking to offer their workers flexibility while providing best-in-class amenities, service, and health & wellness.”
He added, “While Phoenix has seen new-to-market flex providers such as Industrious rapidly expanding their footprint over the past couple of years, Phoenix was undoubtably late to the flex game. Just 1.4 percent of our city’s office space is comprised of flex space, which means the existing inventory should be quite resilient while still providing an opportunity for healthy growth within the sector. Flex space providers will follow the lead of their corporate clients by focusing their expansion more narrowly on the buildings that can offer best-in-class experiences at premium locations.”
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,
CBRE Press Release
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.
To download the full report, click here.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2019 revenue). The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.