Nearly Half of Corporate Real Estate Heads Increasing Flex Space Investment

Nearly Half of Corporate Real Estate Heads Increasing Flex Space Investment

There’s no stopping the momentum toward co-working office spaces as firms and major brokerages continue to increase investment in this trending office environment.

JLL’s Future of Work Survey of more than 1,000 corporate real estate decision-makers found that 43% of firms plan to increase investment in flex space through 2025.

The push is being driven by increasing hybrid work arrangements, a flight-to-quality among occupiers and a desire to avoid long-term leases, according to a recent report from Yardi’s CommercialEdge.

“Given the flexibility and amenities coworking locations provide, there is real opportunity to align with what corporations are needing in future space decisions,” Peter Kolaczynski, senior manager, CommercialEdge, said in prepared remarks.

“We’re tracking around 120 million square feet of flexible space and expect that number to rise significantly in the future.”

The Two-Year Flex Market Horizon is Brightest

Sure enough, CBRE’s Occupier Sentiment Survey showed while only 17% of U.S. occupiers report that flex space is a significant portion of their real estate portfolios today, 59% said that it will be significant within the next two years.

A joint WeWork and Cushman & Wakefield survey found that people in WeWork offices currently spend 40% of their work time in the flex space but want to increase that to 55% in the future, according to CommercialEdge.

Furthermore, commercial real estate brokerages are increasing their investments and their footprints. For example, after investing more than $200 million in Industrious in 2021, CBRE put an additional $100 million into the flex space operator this year and others are operating their own coworking spaces.

IWG, the parent company of both Regus and Spaces, announced it would be adding at least 500 US locations that will focus on smaller cities and the suburbs, reported CommercialEdge, and Cushman & Wakefield entered a strategic partnership with WeWork, investing $150 million and combining the coworking firm’s hospitality technology with the brokerage’s asset and facilities management services.

JLL, Boston Properties Get in the Game

Under the brand Flex by JLL, it is operating coworking spaces and will be developing a ground-up, 15,407-square-foot coworking space in Secaucus, N.J.

Boston Properties has rolled out FLEX by BXP in a handful of its buildings and Irvine Company offers Flex Workspace+.

Commercial Edge said smaller landlords are wary of the large capital expenses that come with building out high-quality flex space and might look to dedicated operators instead.

“Management agreements which allow owners and flex space operators to share revenue could become a common solution,” according to CommercialEdge.

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