What’s Driving the Resurgence in Flex Workspace?

A mere nine to twelve months ago, pundits began questioning the future of coworking. Reports surfaced of over 700 pandemic-related coworking failures – a North American market contraction of over 20%. Wework’s freefall showed no signs of improving, and a string of bankruptcies and acquisitions had begun with Breather, Knotel, Serendipity Labs, and Industrious ultimately closing or selling significant portions if not all of their operations. Would Covid-19 spell the end of coworking?

By now it’s clear that the answer is a resounding no. Not only were “rumors of its death greatly exaggerated,” as Mark Twain might have said, but coworking appears poised for a tidal wave of growth in 2022 – rising like a phoenix from last year’s ashes, as it were. Demand for shared office space is on the rise. Colliers International identified coworking space as one of the few office resources growing in demand. Today, flexspace only makes up 2% of all office space, but experts predict that 35% of corporations will start using coworking space in the near future. Analysts predict that 30% of all office space will be shared workspace by 2025.

Other sources also suggest a resurgence in flexible workspace:

• The Coworking Space Global Market Size Report predicts coworking to grow from $7.97 billion in 2020 to $13.03 billion by 2025.
• The number of coworking spaces will double between 2021 and 2024 from 23,548 to 41,975, according to Statista.
• The number of coworking members worldwide is expected to reach 5 million by 2024.

Even as the Delta variant slowed many companies’ return to the office this summer, a number of factors appear to be driving these expectations.

What’s Behind the Bullish Outlook? Enterprises.

There are a variety of business arguments for why corporations should embrace flexible workspace in the midst of the current uncertainty. Its ability to immediately reduce cost and risk are two.

As the cost of office space rises, flexspace becomes increasingly attractive. In many markets, the cost to rent a desk or even a shared private office space is one-third to one-fourth the cost of traditional leases. For tax-burdened organizations, coworking space is attractive because it allows them to swap capital expenditures in office space and equipment for tax-deductible operating expenses.

Outsourcing workspace to coworking partners also simplifies operating complexity and expense thanks to the benefits and amenities inherent in many flexspace contracts. Most coworking agreements include high-speed WiFi, furniture, fully-equipped kitchens, copy and print stations, mail rooms, bike storage, and easy-to-use mobile apps for managing resources like conference rooms and maintenance requests. They cover utilities, janitorial, and security. Their lounge areas offer free filtered water, coffee and tea where workers can take a break or eat lunch. The best ones also offer a calendar of networking or educational events to build relationships and community – and none of these require corporate resources to deliver or manage.

Renting coworking space also minimizes risk. Companies don’t have to commit to long-term leases and terms are generally much more flexible. Consider all the desks at corporate offices left empty during the pandemic. Instead of paying to maintain empty office space, companies lease what they need when they need it, and can more readily scale up or down as needed.

Offering employees more opportunities to utilize flex space on an individual or smaller team basis has also helped many organizations get employees back into productive workspace while alleviating the liability of doing so en masse at corporate offices.

In short, flex workspaces give enterprises what they need most right now: flexibility. The world of work is changing faster than ever, and no one knows quite where it will land in yet another nine or twelve months. Organizations are pivoting to meet needs fast and finding flex space to be a resource that helps them get there.

Coworking Wins with Employees

It’s also become clear that adopting coworking options helps companies find and attract great talent. When employees aren’t tethered to a few select corporate locations, the pool from which they can recruit talent expands indefinitely. This has become increasingly important as more than 7 million American households moved counties in 2020 – nearly half a million more than in 2019. Reversing a 10-year growth trend for major cities, and led by millennial and other younger Americans, suburbs and mid-sized cities – many in southern states like Florida and Texas – have been the biggest beneficiaries of this migration. As young talent flocks to places like Colorado Springs, Boise, Des Moines, Louisville, and the areas around Austin, employers have had to get creative quickly to land and enable new hires based in distant outposts.

Flex options are also proving to be powerful motivators in retaining existing talent. A Prudential survey revealed that 68% of American workers prefer a hybrid workplace model, giving them more time to work from outside the pre-pandemic office. Yet few employees want to spend a full 5-days per week working remote. Beyond the well-documented isolation, lack of training and mentorship opportunities, and ability to be consistently productive, even after 18 months of restructuring our homes and schedules to make them so, working remote is not always easy nor enjoyable. And while being in the pre-pandemic office may have offered more water cooler social moments, endless supplies of printer paper and ink, reliable internet, and space to spread out, they’re rarely as inspired and well-equipped as today’s flexible workspaces. With their variety of collaborative spaces, unlimited espresso bars, sun-flooded lounges, proximity to preferred amenities, and wellness-oriented space plans, they offer a more enjoyable work experience than many an office park.

For employees managing a slightly different remote work program – for example those whose roles require heavy travel – access to a network of coworking locations helps ensure they can be as productive as possible on the road with access to formal workspace infrastructure and resources across cities.

This network access similarly benefits the growing number of employees making lifestyle choices to spend longer stretches of time temporarily away from their primary residence. 2020 saw a 50% increase in the number of Americans considering themselves digital nomads. But even more interesting was the fact that traditional jobholders for the first time surpassed independent workers, to make up over 60% of this workforce.

At the very least, giving employees the option of flex workspace signals a willingness to listen and respond to their desire for more control over where they complete their work, at least while the dust settles on holistic post-pandemic workspace strategies. While this will look different for every organization, for many it means evolving space utilization plans for different types of team engagement or adding more satellite locations. For others, it means giving employees a budget and the freedom to select from a range of available work-from-anywhere options.

Federal Government Embraces Flex

The federal government is a great example of an enterprise betting on flexspace. In August, the U.S. General Services Administration (GSA) awarded Expansive and four others a contract to provide coworking space to federal employees through the GSA Total Workplace Program. This major initiative seeks over the next five years to shift a significant amount of government workspace to flex providers in a bid to reduce cost, improve productivity, minimize environmental impact, increase agencies’ talent pool, and enhance morale and loyalty within the federal workforce. With over 2 million employees and 700 million square feet under management, the program’s sheer scale makes it a powerful vote of confidence in the potential of flex to help redefine new workspace standards.

“Work From Home” and “Work From Anywhere” programs were piloted in several government agencies before 2020 but gained significant momentum after the massive shift to remote work last March. The US Patent and Trademark Office had seen particular success with the programs, which helped it quickly transition 13,000 employees to remote work in March 2020. While most of its agents work independently either from home or individually procured workspace, other agencies will likely shift entire groups or teams into flexible office suites or collections of offices and conference rooms. Still other departments may customize dedicated space into specific-use applications like labs or libraries.

Whatever workspace need exists, the beauty of flexspace is that it can be molded to address it efficiently and effectively. It’s often available immediately, off-the-shelf. It’s available all over the country. It’s available at a lower cost and attractive terms. It can be customized quickly. It can be scaled up or down easily. It can be managed at scale from afar. And it is designed to give employees the level of control over their day-to-day they are demanding, within the parameters defined by their corporations. Organizations have outsourced key capabilities to specialized providers as a best practice for decades in functions like Legal, Finance, IT, or Manufacturing. Workspace management seems to be at the tipping point of its own critical mass adoption if current trends continue.