As the pandemic took its initial hold throughout 2020, many of the necessary compensations made felt temporary. Yet, as the year continued to unfold and companies scrambled to adjust their practices to stay in business, many began to consider that much longer-term changes may be on the horizon.
By the time we rolled into 2021, there was a far clearer picture that covid would continue to force plenty of global change for some time to come. The business world continued to adapt as best it could, and the necessity for remote working brought with it an entirely new perspective of business life as we knew it.
It became inevitable that the second half of 2021 would be dominated by companies making the shift towards flexible office spaces, but in fact, this transition began even sooner. By early 2021, many businesses were beginning to incorporate longer-term strategies to create flexible work practices to enable them to stay afloat and weather any subsequent uncertainties brought about by new covid variants.
According to a study published by Zion Market Research, the flexible office market is expected to reach a value of approximately $111.68bn by 2027, having already accumulated revenue of almost $27bn in pre-pandemic 2018.
The concept of modernizing our approach to business has been gaining momentum for some years now, with coworking spaces rapidly emerging and providing foundational structure for small businesses and start-ups. Once considered a novelty offering, flexible workspaces have become a significant element of commercial real estate strategies. The flexible workspace concept has been evolving, and currently focuses on a wide range of professional solutions; private offices, meeting rooms, coworking venues, virtual offices, and more. The suite of complimentary amenities goes a long way to bolstering the viability of the business model, too - every modern worker wants access to exceptional WiFi connectivity and the best coffee in town, to name a few.
Then came the pandemic, and any sluggish transitioning towards flexible work practices were put to the test. As the trend for flexible working dynamics continues to be favored by workers post-pandemic, businesses too are acknowledging key benefits to offering flexible, coworking spaces. Many companies are able to reduce their office footprint and therefore overheads, and this new approach also encourages the building of new business relationships and collaboration opportunities.
Not only are businesses responding to demand, necessity, and the natural evolution of the sector, but the uncertainties brought about by the pandemic have caused them to drill down hard on resilience measures. Therefore, many enterprises are making the shift towards long-term, flexible workspaces to reduce their occupancy overheads, improve their flexible reactivity to economic downturns, and avoid committing to long-term leases.
According to a recent report, the US represents the biggest flexible office market, with more than 3,700 shared offices throughout America and counting. New York is currently home to a large proportion of those, as it hosts the country's greatest number of small businesses and freelancers. Still, as we move into 2022, this trend is expected to spill over into other major metro areas and large towns.
Sharing workspaces in flexible office environments was initially considered quite niche, centered around the needs of freelancers and solo entrepreneurs who needed to get out of the house and host the occasional professional meeting.
The impact of Covid-19 on the flexible office market has been interesting, as the pandemic has brought about seemingly contrasting demands for greater flexibility and connectivity. Greater flexibility in how we work can lead to more isolation and fractured team dynamics, so the demand for it is naturally coupled with the increased demand for technologies that support superior communication, collaboration, and general connectivity. These tools are also essential to ensure that teams remain united in their visions and goals, as well as productive and motivated.
The pandemic lockdowns have demonstrated that, with the right infrastructure and technology, workers can typically perform well remotely. Moreover, this experience has created a shift in perspective, making long-term, flexible work practices a viable long-term option.
Moving forwards, flexible offices will need to cater to the needs of their users by installing access control systems that are ideally touchless and remotely managed for optimal convenience to all. Additionally, a shift towards eco-friendly, sustainable work practices will help to ensure a favorable market response to coworking spaces. In fact, flexible workspaces are expected to become ever-more member-centric, with such elevated concern regarding safety, hygiene, and security, implementing technologies and features that demonstrate commitment to user satisfaction is more important than ever.
As remote working became the norm, many workers fled metro areas for greener, more spacious suburban living. While a return to cities is evident since restrictions have eased, many are still opting for suburban living given the ongoing flexibilities that their work now affords them.
Consequently, the flexible and hybrid workspaces market is expanding into suburban areas, and competition is increasing rapidly. It is expected that this significant shift in our fundamental workplace model will inevitably create market volatility, as only the strongest and most strategic players will survive. This shift will also see rapid changes to commercial development and redevelopment to allow for the sector's changing needs. Certainly, the traditional office workspace era is by and large behind us forever.
Leading global real estate and investment management agents, Jones Lang LaSalle (JLL), have recently released a report outlining the latest U.S. office market trends and statistics. The report demonstrates clear economic improvements and an upturn in market activity, suggesting the likelihood of a positive trajectory for 2022.
For the first time since the pandemic began, the U.S. office market recorded a positive net absorption during the fourth quarter of 2021. Despite the new Covid variants continuing their threat to market stability and disrupting the return to daily business-as-usual, leasing rates increased by 9.2% during the fourth quarter and pushed the annual volume to 14.6% over year-on-year figures. Meanwhile, sublease space figures regained balance, and vacancy rates remained much the same.
Additionally, the U.S. economic recovery remained promising during this same period, with record consumer spending figures and over 6 million jobs being created throughout 2021.
Now that the vaccination rates have reached a critical point of protection and leisure travel activity is heading back up towards pre-pandemic levels, experts predict that a continued upward trajectory is likely as we head into 2022.
Here are some more insights from the report that outlines the sector’s positive momentum:
Overall, given the level of activity and rapid return to pre-pandemic ballpark figures, the outlook for the U.S. office market, in general, is positive for the coming year. In addition, JLL’s Global Flex Space Report finds that 41% of office tenants expect to increase their use of flexible work spaces as a vital component to their post-pandemic business strategy.
Given that 63% of employees reportedly prefer a hybrid working model, it stands to reason that, when combined with the positive outlook for the general office market, many more flexible office models will continue to emerge in the coming months and years.
As we return to work in 2022, the focus is expected to primarily remain around businesses establishing hybrid workspace models. While the vaccination rate has allowed us more freedoms, the continued uncertainty of new Covid variants requires companies to adopt flexible approaches that can cater to sudden changes if necessary. The hybrid work model is favored for its resemblance to traditional, face-to-face collaborations while supporting a flexible model where remote-working is viable and cost-effective. It's a comfortable compromise for many businesses as they transition into a new era of business modeling.
For others, particularly the start-up ventures with younger visionaries at the helm, it will be full steam ahead with innovative, flexible work environments explicitly designed to cater to the needs of modern entrepreneurs.