2022 Flex Office Changing Workplace

What does this all mean? The Future of Flexible Office

• Flexible Office usage / occupancy dropped during the pandemic from 10%-50% on a location/operator basis. • Recovery started in earnest in Q2 2021 when restrictions started to ease. For example, in June 2021 WeWork reported its bests sales numbers since 2019 according to Bloomberg. • In some markets, we estimate that flexible office occupancy has already recovered 50% of losses from the pandemic. • Performance across the board is therefore projected to be back to 2019 levels within 6-12 months. • In the meantime, acquisition activity has flatlined and total flexible office stock has either remained flat or declined. • With occupiers starting to crystalize decisions on the future of their workplace, likely leading to increased demand for flexible workspaces, we could be facing insufficient supply to meet demand in the latter part of 2022, particularly for larger blocks of space. • While operators are switching their focus from survival to growth, the timing of new space coming online will likely lag. That will likely result in upward price pressure and a switch from a buyers’ market to a sellers’ market. • In parallel, while landlords are becoming increasingly eager to join the flexible workspace party, many are still grappling with the switch from lease to management agreement structures and the associated implications on investment valuation. • Therefore, the whole ecosystem needs to continue to adjust to the changes in order for the market to continue to grow and evolve that way we anticipate.

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