The rapid expansion of flexible space – which includes co-working centres and serviced offices – over recent years is now being followed by a COVID-induced recession that has reduced demand for office space, flex included. We expect some contraction and consolidation within the flexible office space market over the coming years, with some providers having operating models or financial positions less able to withstand the economic downturn. But beyond the short-term challenges there will be opportunities over the medium and long-term outlook period:
Medium-term: there will be increased demand for flexible and on-demand space as occupiers return to the workplace. For some, pre-COVID space expansion plans might be put on hold and they will instead augment their needs with on-demand and flex space.
Long-term: remote working has proven a degree of success and employees have greater desire not to sit in the same office – day in, day out. Flex operators that survive the downturn will be well positioned to accommodate the next evolution in working strategies. We also expect that landlords will become larger players in the provision of flex space through their own offering or partnering with operators.
It's worth remembering that although the current downturn in the demand for office space still has some way to run, eventually demand will rebound.