Flexible Office for the Evolving Workforce

FOR THE EVOLVING WORKFORCE

JUNE 2023

Executive Summary TRENDS IMPACTING THE FLEXIBLE OFFICE* MARKET

Employee preferences for hybrid work have led to a shift in office space utilization. This trend accelerated in 2022 as occupiers explored ways to attract employees back to the office. Employees ultimately view the office as a space for collaboration and socializing, both key characteristics of flexible office spaces. As a result, occupiers are frequently using flexible office options as a tool to manage their footprints and attract workers to the office.

Return to Office Reshapes Office Sector

Evolution of The Flexible Office Sector: Occupiers

Leveraging Flexible Office Opportunities: Owners

Adapting to Paradigm Shifts in Flexible Office: Providers

Challenges Impacting the Flexible Office Sector

*Terminology for the flexible space analyzed in this report varies across regions. This report primarily utilizes “flexible office” throughout, but occasionally refers to the term “flexible workspace” (the common term utilized in Europe) interchangeably.

A broader return to work in the last year has amplified flexible work trends, and persistent worker preference for location flexibility has led to shifts in how occupiers and landlords think about office space. Three trends in today’s office market are beneficial for the flexible office sector: 1. Prevalence of hybrid workplace ecosystems requiring greater flexibility for employers and office workers, including meeting and drop-in spaces. 2. Importance of high-quality amenitized space of which flexible office can be an offering. 3. Reduction in office lease size which is creating occupier need for on-demand third-party meeting space in or near leased office space.

WHAT THE PERSISTENCE OF HYBRID WORK MEANS FOR FLEXIBLE OFFICE DEMAND RETURN TO OFFICE RESHAPES OFFICE SECTOR

Return to Office Dominated by Flexibility U.S. workers working hybrid or remote vs on-site 2019-Q4 2022

Hybrid Work Persists

• As the share of employees working exclusively remotely returns closer to pre pandemic levels, hybrid is the new “norm.” • As of November 2022, a fifth of office employees have indicated they are on-site every day while a fourth are exclusively remote. The remainder (53%) are working in a hybrid workplace ecosystem (i.e., in the office part of the time and working remotely part of the time). • According to Gallup, employees prefer more flexibility. A third want to be work exclusively remote while the overwhelmingly preferred work model is hybrid (the stated preference of 61% of employees). • Cushman & Wakefield’s Experience per Square Foot TM analysis shows a similar trend towards post-pandemic flexibility.

Hybrid (>10% to <100% remote)

Exclusively Remote

On-site

80%

70%

70%

60%

60%

53%

50%

40%

32%

30%

Share of respondents

26%

18%

21%

20%

10%

12%

8%

0%

2019

Q2 2020 Q2 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022

Source: Gallup

Employees Want Hybrid to Stay Across industries, employees indicate they want the flexibility of hybrid work arrangements

Preferred Office Attendance

Never/Rarely

62%

1-3 times a month

1-2 days per week

OVERALL

3-4 days per week

Business / Professional Services / Consulting

Every Day

Biotech / Life Sciences / Pharma

Marketing / Advertising / Public Relations

Finance / Banking / Accounting / Insurance

Healthcare

Technology

100% 80%

60%

40%

20%

0%

20%

40%

60%

80% 100%

% of Respondents

Source: C&W Experience Per Square Foot ™ survey, results from October 1, 2020 – August 15, 2022; Professional Services (n=536), Life Sciences (n=500), Marketing/Advertising/PR (n=328), Finance/Banking/Accounting (n=2,591), Technology (n=6,102), Healthcare (n=1,309)

Employers See Hybrid as the Future Too Categorization of companies’ publicly stated workplace strategies

Matching Up Employer & Employee Preferences

Office Centric Hybrid Remote First

Work From Anywhere

• Employers have broadly settled on a hybrid workplace ecosystem in response to employee preferences and a tight labor market. • Across most industries, the plurality of companies have communicated that the company norm — with exceptions for specific teams and roles — will be for office workers to be in the office on a regular basis, but not required to commute more than twice a week. The second most common for all industries except technology is an office-centric model where employees are in the office 3+ days per week. • Flexible office is well situated to meet the needs of employers and workers looking to manage flexibility.

Legal

56%

25%

19%

Media/ Telecom

39%

61%

Food & Beverage

38%

62%

Financial Services/Insurance

37%

60%

3%

Tech

22%

35%

36%

7%

Professional & Business Services

17%

65%

17%

Healthcare/Life Science

11%

82%

7%

Source: Public announcements from 110+ national and global companies, as tracked by Cushman & Wakefield Research As of March 2023

Quality Matters More Than Ever U.S. Class A share of overall leasing, four-quarter rolling total

Accelerated Flight to Quality

Class A Share of CBD

Linear (Class A Share of CBD)

• Another trend that benefits flexible office providers is an increased flight to quality during the pandemic. Occupier preference for high quality, highly amenitized space has driven leasing activity for the past three years. • While the overall office market has experienced negative absorption, the newest and best office buildings have actually experienced over 100 msf of positive absorption since 2020. • There is, unfortunately, not enough of this space creating an opportunity for certain office owners. Flexible office and rentable conference spaces are increasingly part of a suite of amenities available in the best office spaces.

74%

73%

72%

71%

Total Leasing (SF)

70%

69%

2018 Q1

2018 Q2

2018 Q3

2018 Q4

2019 Q1

2019 Q2

2019 Q3

2019 Q4

2020 Q1

2020 Q2

2020 Q3

2020 Q4

2021 Q1

2021 Q2

2021 Q3

2021 Q4

2022 Q1

2022 Q2

2022 Q3

2022 Q4

Source: Cushman & Wakefield Research

Flight to Quality is Global European ‘Grade A’ and ‘non - Grade A’ availability

Bifurcation in the Office Market

12.0

40%

• Flight to quality is a global office trend that has also impacted European markets. • European Grade A availability ratio has remained stable at 2.6% quarter-on quarter. However, the availability ratio for non-Grade A climbed to 5.5% in Q3 2022 from 5.2% in the previous quarter. • The proportion of Grade A space as a percentage of available European office space has shrunk from 35% to 32% over the last two quarters. • These levels are high by historic standards, however, flight to quality and slowing construction should continue to exert downward pressure on Grade A availability.

10.0

sqm (mil)

35%

8.0

6.0

30%

4.0

25%

2.0

0.0

20%

Q2 2011

Q4 2011

Q2 2012

Q4 2012 Q2 2013 Grade A Avail Q4 2013

Q2 2014

Q4 2014

Q2 2015

Q4 2015

Q2 2016

Q4 2016

Q2 2017

Q4 2017

Q2 2018

Q4 2018

Q2 2019

Q4 2019 A as % (RHS) Q2 2020

Q4 2020

Q2 2021

Q4 2021

Q2 2022

Q4 2022

Non Grade A Avail

Source: Cushman & Wakefield Research

EVOLUTION OF THE FLEXIBLE OFFICE SECTOR

The flexible office sector has evolved significantly over the last decade. 1. User base is diversifying : It began primarily as a freelancer and startup community that catered to individual users with hot desks, monthly plans and happy hours. It has since evolved to include corporate occupiers. 2. Hybrid work has impacted user needs : Users are changing how they utilize space, increasing their preference for meeting spaces which impacts the memberships they select. 3. Lease structures are evolving : Occupiers are looking for increased flexibility in their leases which benefits flexible office.

OCCUPIER UTILIZATION OF FLEXIBLE OFFICE EVOLVING

2023: Flexible Office Demand End Users: Outside of your core portfolio, do you provide your employees with access to flexible office / workspaces?

Increase in Users

• Based on a 2023 CoreNet and C&W survey, nearly half of occupier end users indicate they currently use and/or are planning to grow their use of flexible office. o Current: 39% are currently end user organizations that are providing employees with access to flexible workspaces. This is an increase from 35% in 2021.

2021

2023

10%

12%

37%

25%

27%

52%

Growth: 36% are planning to increase employees’ access to flexible office. This is a drop from 53% in 2021, however, usage has increased.

o

9%

28%

o No Usage: 52% are not currently nor plan to increase access to flexible office. This is an increase over 37% in 2021.

No & NOT planning to increase

No, but planning to increase

Yes & planning to increase

Yes, but NOT planning to increase

Source: Cushman & Wakefield Research; CoreNet Global

Occupier Utilization of Flexible Office Occupiers are increasing usage of meeting rooms and collaboration spaces

Evolving Use

• Meeting spaces and private offices are in high demand, altering the space mix of pre-pandemic flexible office. • The evolution of flexible office space has included a shift from primarily individual/ startup users to an increase in corporate users. • As hybrid policies surge in popularity, occupiers have become more efficient with their space. However, on days when entire teams are in the office, corporate users leverage meeting rooms and collaboration space.

Increased usage of meetingrooms/collaboration space

21%

Increased usage of private offices

20%

Change in ratio of team size to workspace size

19%

Change in hours or days the space is used

15%

Demand for new ways to purchase on demand products

10%

Demand for health-related best practices

7%

No changes are being seen

4%

Greater demand for usage metrics and data

4%

0% 5% 10% 15% 20%

Source: The Instant Group; Summer 2022 Future of Flex Survey; Deskmag

Primary Flexible Office Workspace Demand Occupiers in all markets have an affinity for meeting spaces

Meeting Spaces Demand is High

Top 3 Workspace Types by Demand*

• Contrasting urban and suburban markets, meeting spaces are in high demand in the latter while suburban users are seeking individual offices at a higher rate. • Demand differed across regions; event rooms were preferred in North America while hot desks were more sought after in Europe. • User preferences by location also shapes provider considerations by market.

Urban

Meeting Spaces

60%

Team Offices

51%

Individual Offices

51%

Suburban

Individual Offices

52%

Meeting Spaces

49%

Hot desks

23%

Rural

Meeting Spaces

58%

*Providers were asked to rate the demand of space type by location

Individual Offices

48%

Event Spaces

33%

0%

10% 20% 30% 40% 50% 60%

Source: Deskmag; Coworking Trends Survey November 23-December 21, 2021

All Access Memberships Continue to Climb

Trending higher as more workers return to the office

Users Prefer Flexibility

• WeWork’s all access memberships have continued to grow the last nine quarters. Memberships have grown over 50% in the last year. • All access memberships allow increased flexibility for a distributed workforce. • The popularity of all access memberships indicate worker preference for an office experience.

WeWork All Access Memberships

70,000

67,000

62,000

55,000

45,000

32,000

Number of Members

20,000

15,000

13,000

Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022

Source: WeWork Annual Report

All Access Memberships and Flexibility Occupiers and their hybrid workforce value the flexibility offered by all access memberships

Office Usage Has Increased

Usage by Space Type

Monthly Change in Usage*

• Client usage of all access membership has trended upwards. Seasonality, including summer vacations and holidays, impact usage. However, over the last three months, usage has steadily increased which reflects the larger return-to-office trends. • Current usage preference leans to desk usage with meeting rooms in second place. *Based on C&W Passport, same store data for the past 12 months. C&W Passport is a space aggregator offering occupiers all access memberships with nearly 10,000 providers globally.

Private Office 3%

Airport Lounge 0.2%

250%

217%

200%

155%

150%

Meeting Room 14%

100%

75%

58%

51%

50%

23%

0%

-2%

-11%

-15%

Desk 83%

-29%

-31%

-50%

-47%

-100%

Jul-22

Apr-22

Oct-22

Jun-22

Jan-23

Mar-22

Feb-23

Aug-22

Sep-22

Nov-22

Dec-22

May-22

Source: C&W Passport

Increased Efficiency of Office Space U.S. average square footage of Class A leases signed by year

Lease Sizes Down 16% from Historical Avg. in 2022

20,000

• Occupiers have been looking for ways to become more efficient during the pandemic to optimize costs and adapt to employees’ more flexible work schedules. Leases signed in 2022 were on average 16% smaller than the historical norm. • Shrinking footprints do have challenges, however. For example, with peak office usage occurring Tuesday through Thursday, office space can become quite tight on those days. • This can create demand for flexible space on peak days. Additionally, on demand meeting space provided by landlords and/or flexible office providers can be an asset for occupiers at a reduced overall cost.

18,000

16,000

Square Feet

14,000

-16%

12,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Avg Lease Size (SF)

Historical Avg.

Source: Cushman & Wakefield Research

Leases Are Longer Than Depths of Pandemic Length of new leases down from 2019 peak, but in line with historical average

Lease Lengths Reverting

• Shorter lease terms are still in demand, but that trend has slowly been reversing, more so for new leases than renewals. • New lease terms are approaching the historical average and are currently four months longer, on average, since bottoming in Q1 2021. • Renewal lease lengths have also climbed closer to their historical average of 59 months, but still four months shorter.

Average lease length of Class A leases, in months (4-quarter rolling average)

New Leases

Renewals

New Leases - Historical

Renewals - Historical

90

80

72

70

70

66

59

60

55

50

2011 Q1

2012 Q1

2013 Q1

2014 Q1

2015 Q1

2016 Q1

2017 Q1

2018 Q1

2019 Q1

2020 Q1

2021 Q1

2022 Q1

2023 Q1

Source: Cushman & Wakefield Research

Hybrid work has significantly changed how occupiers view flexible office solutions. Owners have taken note of successful flexible office utilization and are adjusting their models to meet the evolving requirements of occupiers. 1. Increased owner interest in flexible office : Owners are increasingly looking to flexible solutions as an amenity to help differentiate their properties. 2. Alternatives to vacant space: Increasingly, owners with low occupancy buildings are rethinking their space offerings. 3. Attractive lease terms: Owners are increasingly offering flexible office lease options, including short-lease terms, flexible leases and adjustable space, among others.

LEVERAGING FLEXIBLE OFFICE OPPORTUNITIES

Lease Flexibility is Paramount Expectation for lease flexibility and agility over the next five years

Occupiers Expect Flexibility

• A recent survey of occupiers and owners points to some disconnect between the two groups. • Both believe that shorter leases will continue to be preferred in the next five years. However, more owners than occupiers feel that there will not be any change to lease structures in the next five years. • Occupiers will continue to strategize their lease sizes, locations and terms over the next five years. Flexible office can bridge the gap for both owners and occupiers.

Landlords Occupiers

40%

30%

20%

10%

0%

Shorter average lease lengths

Adjustable space (ability to grow/ shrink footprint within a single contract)

Shorter periods between breakclauses

Flexible leases with rolling monthly contracts

No change to flexibility/agility of leasing

Based on a survey of 285 respondents comprising office occupiers, landlords and third-party advisors.

Source: The Instant Group, ULI, 2023 Forecast

Owners Expect to Increase Flexible Office Offerings Two-thirds of owners looking to utilize flexible office

Owners Prefer Self-Delivering Flexible Office • Flight-to-quality has owners increasingly adopting flexible office solutions to differentiate their properties/portfolios. • Pre-pandemic, nascent owner-provider partnerships were developing in the flexible office sector. As the pandemic took hold, many owners pressed pause on plans while they evaluated their portfolios and plans. • This 2022 survey points to continued interest in owner-provider partnerships, however, owners are largely looking to self deliver flexible office.

Looking to partner up with an existing provider under owner’s brand

10%

Not exploring additional flexible workspace options

36%

Looking to lease space to a flexible workspace provider

18%

Looking to self deliver flexible workspace solutions

36%

Source: The Instant Group; Summer 2022 Future of Flex Survey

Owners Expect to Increase Flexible Office Offerings Why do owners want to self-deliver flexible office?

Innovating Flexible Solutions

• Given the increase in vacant blocks of office space across buildings, owners are turning to creative solutions to increase occupancy at their properties. • These creative solutions increasingly include the self-delivery of flexible office solutions to tenants. • Occupiers are seeking flexible solutions to their space requirements as workforce needs evolve. In some cases, vacant sublease space with short-lease terms has been negotiated by occupiers as flexible office. Owners readily adopt these occupier requests in order to transition this vacant space into revenue.

Generate additional revenue

29%

Secure tenants at an earlier stage in their growth

18%

Provide additional services for existing and new tenants

18%

Build a flexible workspace brand to add overall value

18%

Understand more about their customers

12%

Other

5%

0% 5% 10% 15% 20% 25% 30%

Source: The Instant Group; Summer 2022 Future of Flex Survey

As user preferences evolve, providers have remained nimble and recalibrated their flexible office offerings to meet changing demands. 1. Responding to changing preferences : Providers are focused on meeting the needs of users, which can include a wider range of memberships. 2. Redesigning spaces : Capital expenditures to improve layouts and change densities are priorities. 3. Thinking outside the box : Utilizing space aggregators to increase access to user networks.

ADAPTING TO PARADIGM SHIFTS IN FLEXIBLE OFFICE

PROVIDER PRIORITIES SHIFTING

Providers Respond to Evolving Occupier Preferences As the workplace evolves, providers are evolving to meet their clients' changing needs.

Type of Membership Offerings is Key • Flexible office providers are offering a wider array of memberships to meet a diverse group of needs following the pandemic. • As more employees prefer hybrid schedules, workers are placing a high value on connecting with others. Providers are helping achieve this by changing office densities, including adding open layouts that encourage collaboration. • Providers are facing challenges when trying to balance implementing new capital expenditures and rising operational costs. However, most prefer to make the expenditures to deliver quality options to their users. They plan to offset costs by raising prices.

Offering new types of memberships

33%

Reinvesting and redesigning fit-outs and layouts

26%

Change the densities of office space

17%

Investing in New Technology

14%

No changes are being made

10%

0% 5% 10% 15% 20% 25% 30% 35%

Source: The Instant Group; Summer 2022 Future of Flex Survey

Current Challenges Impacting Providers Providers choose to pass on costs in order to maintain quality

Maintaining Quality is a Priority

Rising costs and inflationary pressures

32%

• Providers are facing significant inflationary pressures felt globally by most sectors. • A survey of providers asking how much operators were planning to increase rates over the next 12 months revealed that 70% expected to increase rates. Rate increases are expected to land between 6%-15%. • On a regional basis, rate increases expected during the year include North America – 4.9%; EMEA – 6.6%; APAC – 8.3%; UK – 9.1%; Latin America – 9.9% • Providers are choosing to increase prices rather than cut back on services and quality .

Changing customer needs

14%

Creating a dynamic collaborative culture

13%

Increased amounts of vacant traditional office space

13%

Low levels of occupancy

12%

Lack of digital technology

5%

Other

4%

Health restrictions

3%

Achieving net0-zero

3%

0%

10%

20%

30%

Source: The Instant Group; Summer 2022 Future of Flex Survey

Space Aggregators Increase in Popularity

Technology based solutions simplify access

Increasing Access

• Aggregators help members find flexible office space that fits their needs by providing access to a wide range of options across providers and locations. • Space aggregators have been on the rise since 2010, with approximately 20 aggregators entering the market since then. • Aggregators bring together providers in one network, improving access to flexible office spaces for both employees and occupiers. • Brand dilution is a potential concern for providers. The benefits of exposure to a wider network of users, however, outweigh those concerns.

20+

Approx. 1.5 added/year 3

Number of aggregators pre-2010

Current number of aggregators

Source: Various Space Aggregators Company Website

Flexible Office Model Adapted Widely Implementing flexible solutions across sectors

• Increasing interest in space-as-a-service (SaaS) among various industries • Landlords rethinking how to utilize large blocks of vacant office space • Providing scale for individuals and startups

Shared Medical Office

Pop-Up Stores/Co-Retailing

•

Shared office services

•

Pop-ups allow new companies a temporary space and they may eventually grow into their own brick-and-mortar. Co-retailing can be a longer term agreement between retailers. It has been used successfully by big-box retailers to bring both well known and new names to their stores and increase foot traffic.

•

Medical professionals focus on their practice

Shared Labs/Incubators

•

Sharing of lab equipment which is typically very expensive Networking opportunities and sharing of ideas in shared spaces

• Additional insights on specific sectors:

•

– Life sciences

•

– Healthcare

– Industrial

Co-Warehousing

– Retail

•

Shared office and warehouse space

Co-Living

•

Networking and collaboration benefits in shared spaces

•

Shared living with concierge style amenities

The flexible office sector has emerged from the pandemic well positioned for future growth. Although economic headwinds can potentially slow growth, the sector will innovate as it has in the past. 1. Nearly 20,000 locations globally, 1 led by Europe and Asia. 2. Regionally, right sizing continued in the U.S. as major European markets added additional space. 3. Globally, 44% of operators attained occupancy rates of 81% or higher in the year ending September 2022. 4. Layoffs and economic uncertainty will impact the sector, but opportunities for growth remain.

CHALLENGES IMPACTING THE FLEXIBLE OFFICE SECTOR

HEADWINDS AND OPPORTUNITIES

1. Coworker, The Instant Group

Right-Sizing Continues North America shed space while European markets see growth slowing

Changes in Inventory

Q2 2020 - Q2 2021 Q2 2021 - Q2 2022

• North American markets continued to shed flexible office space in the past two years after the aggressive growth of the last decade. Course correction in over exposed markets accelerated in the period of Q2 2021 – Q2 2022. • Top European markets continued to see inventory growth in the last two years. The accelerated pace of growth, however, has slowed. • Since the beginning of the pandemic, some operators have been creative about shoring up their businesses. Strategies include selling off assets, focusing on core business services, walking away from underperforming locations, and/or renegotiating leases to shared-risk arrangements — i.e., profit sharing leases or management agreements.

10%

8%

6%

4%

2%

0%

-2%

-4%

-6%

-8%

-10%

Europe*

North America

*Major cities only, including Paris, Berlin, Amsterdam, Stockholm and London

Source: Cushman & Wakefield Research

Contraction of North American Markets Inventory down 10% across the largest U.S. & Canadian markets

Changes in Inventory

• In the Americas, flex operators continue to give back space or force renegotiations with landlords. For example, flexible office inventory in San Francisco fell year over year (YoY) from 2.5 msf to 1.3 msf. • Impact on flexible office varies by operator and depends upon location, competition, tenant mix and average contract duration. • Those that have generally fared better include operators that own some or all of their buildings and/or operators who work on a management agreement basis.

-4% -4% -2% -2% -2% -2%

-6% -7%

-10% -9%

-13% -13% -12%

-38%

-50%

-69%

-72%

Source: Cushman & Wakefield Research

Pockets of Growth in North American Markets Inventory growth from Q2 2020 to Q2 2022

Growth Markets

190%

• Despite the overall trend of shedding flexible office space in North American markets, some markets have bucked the trend and continue to grow their flexible office inventory. • These markets added a total of 2.0 msf inventory to the flexible office market, including Houston’s growth from 2.8 msf in Q2 2020 to 3.2 msf in Q2 2022.

44%

16%

14%

11%

Inventory Growth (%)

10%

7%

2%

Phoenix* Tampa Raleigh Durham

Houston Nashville Austin Calgary

DC - Northern Virginia

*Off-chart: Phoenix inventory increased 190%

Source: Cushman & Wakefield Research, Deskmag

Central America and the Caribbean Countries increase their flexible office inventory

Flexible Spaces in the Region

30

• Local firms and renowned global providers offer flexible office in the region, as users seek modern workplace solutions. • Costa Rica’s flexible office inventory has grown 600%+ in the last four years, led by the entry of WeWork to the region. The global provider opened two sites totaling more than 240,000 sqm. • Various landlords throughout the region have created their own brands of flexible office to take advantage of the strong demand for this type of space in their markets. • Occupier demand has led to the creation of various models of flexible office as providers respond to the evolving nature of office work globally.

25

20

15

10

5

Number of office coworking spaces in 2022

0

Panama Costa Rica Guatemala Dominican Republic

El Salvador Honduras Nicaragua

Source: Coworker, Cushman & Wakefield Proprietary Research

Inventory Growth in Major European Markets Annual inventory growth from Q2 2020 to Q2 2022

Flexible Office is Key to Occupier Plans in Europe

Major European Markets

Other European Markets

• The five major European markets saw total inventory grow 18% from Q2 2020 to Q2 2022. • On an annual basis, growth slowed in Berlin and London but was still positive in both. However, as a percent of total office, flexible office makes up a larger percent in London, 6%. • Inventory grew 7% in other European markets from Q1 2021 to Q1 2022. However, these markets are smaller and on average comprise less than 2% of total office inventory.

2020 Q2 - 2021 Q2 Change (%) 2021 Q2 - 2022 Q2 Change (%)

2021 Q2 - 2022 Q2 Change (%)

44%

25%

21%

14% 13%

12%

11%

9% 8%

6%

6%

6% 5%

2%

1% -1% -5% -18%

0%

Market

Stockholm Paris

London

Amsterdam Berlin

2021 Q2 – 2022 Q2 Change

43,729

76,685

80,976

18,960

7,600

2020 Q2 – 2021 Q2 Change

30,794

35,654

154,553

0

61,900

Source: Cushman & Wakefield Research

Occupancy Across Global Regions Most global regions have robust occupancy in the 81%+ range

Robust Occupancy Across Regions

60% or less 61% to 80% 81% to 100%

• Globally, 44% of providers attained occupancy rates of 81% or higher in the year before the survey period of July to September 2022. • The UK’s flexible office inventory achieved the highest occupancy levels with 67% of its space 81% to 100% occupied. • LATAM had the lowest occupancy levels in their flexible office space with 53% of the inventory 60% or less occupied.

North America

24%

32%

44%

UK

22%

11%

67%

EMEA

29%

24%

47%

LATAM

53%

33%

14%

APAC

25%

25%

50%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Source: The Instant Group; based on a 2022 survey of operators, landlords and clients in The Instant Group's network of 3,700+ global locations.

Economic Downturns Provide Opportunity Entrepreneurship generally increases during recessions, spurring startup activity

Layoffs May Impact Demand

• After a hiring binge during the pandemic, tech companies have led layoff announcements since the start of 2022. • Additional cost cutting by companies is expected through 2023. Thus far, layoffs have been concentrated in the tech sector, with a share of 63% of total layoffs announced through April 2023. • Tech companies have historically been significant users of flexible office space. As the sector has diversified its user base, there is more ability by other user groups to absorb the tech slack. • As companies continue to decrease headcount, the flexible office sector may see increased demand for flexible office solutions as companies realign costs with business plans.

Global Layoffs 2022-2023

500

450

421

391

400

350

300

250

200

150

100

Total Layoffs (# Thousands)

50

0

2022

2023 YTD to April 30

Tech Other Sectors Total

Source: Layoffstracker.com

CONCLUDING THOUGHTS

What does this all mean? The Future of Flexible Office

• In a post-pandemic work environment, flexible office has emerged as a leader in delivering solutions to a hybrid workforce for both occupiers and landlords. Hybrid work will continue to be a preference of workers who prioritize flexible work arrangements, therefore, companies will continue to incorporate that flexibility into their space planning. • Flexible office has become a significant part of many occupiers’ considerations as they continue to rebalance their space req uirements to fit their evolving workforce. As occupier needs evolve, flexible office operators and landlords will continue to respond by redesigning space to fit their needs, including flexible lease options and terms. • Landlords with large vacancies in their buildings will continue to consider flexible office options. While most plan to deliver flexible solutions themselves, many will consider partnering with or leasing space to a provider. It is estimated that flexible office will account for 20-30% of total office space by 2030 based on multiple forecasts. C&W estimates that the actual share will be much smaller. • Challenges, including increased operating costs and rapidly changing user preferences, mean that providers need to respond to and adapt their offerings quickly. Healthy demand has helped operators adjust, even while passing some costs to users. • Tech layoffs, which began in 2022 and have continued in 2023, may impact demand. Tech companies are important users of flexible space, especially in Asia where, according to Statista, tech comprises approximately 29% of the business sector. • The current difficult economic environment is introducing uncertainty to corporate business plans. However, while this may impact overall spending plans of providers and landlords, the flexible office sector is likely to benefit from cost cutting. As companies slow down hiring and reduce space, flexible office becomes a critical part of their planning. Recent coworking estimates forecast growth through the next five years with total market size forecast to double by 2027.

IN THE CHANGING WORKPLACE

AUTHORS

Emma Swinnerton International Partner,

Sandy Romero Research Manager, Global Research Sandy.Romero@cushwake.com David C. Smith Head of Occupier Insights, Global Research David.Smith4@cushwake.com

Head of Flexible Workspace - EMEA Emma.Swinnerton@cushwake.com

Ethan Tribble Research Analyst,

JUNE 2023

Alternatives & Practice Groups Ethan.Tribble@cushwake.com

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