Published on Monday, May 3, 2021
Access our latest property investment summary by completing the form below.
As companies reevaluate physical space needs a year after the pandemic, flex space is enjoying a bit of a comeback.
WeWork has tapped JLL to market and lease co-working and flex spaces in 38 locations in seven cities nationally. The arrangement will see JLL acting as what the firms call “an extension of WeWork’s in-house sales team” in New York City, Boston, Atlanta, Dallas, Denver, Phoenix and San Francisco.
Howard Hersch, vice chairman, Clark Finney, executive managing director, and Aaron Ellison, executive managing director with JLL will lead the assignment in New York and nationally.
“We are excited to work alongside JLL during this time of rapid change in the office environment,” said Shyam Gidumal, president and chief operating officer of WeWork. “JLL’s deep industry knowledge, experience, and relationships will enable us to connect with the expanding range of small to large enterprise tenants who can benefit from WeWork's portfolio of flexible space offerings.”
Coworking and flex space were nearly dealt a death knell as the COVID-19 pandemic drove virtually every American out of the office in the most literal way possible. But now, as companies reevaluate physical space needs a year after the pandemic drove leasing volume down a whopping 92%, the sector is enjoying a bit of a comeback. "While companies are developing and implementing plans to return to the office, they simply do not know what their operations will look like in a year," Hersch tells GlobeSt.com. "Information on employee sentiment, vaccine distribution and the impact of variants continues to evolve—and this makes flexibility a key component of success.”
Earlier this year, WeWork inked a SPAC that would give the company $1.3 billion to fund growth initiatives in its post-COVID realignment.
A recent JLL report shows that as landlords reposition real estate strategies, demand for flex space is expected to deepen. The survey of 2,000 office workers revealed that two thirds want to work from different locations post-COVID, and office owners are responding by “actively increasing” the space in their buildings devoted to flex work.
“This is more meaningful than a shifting of deckchairs,” says Ben Munn, managing director of flex space at JLL, in the report. “Companies and investors are taking a different view on flex space entirely and are willing to invest because they see this as a bigger proportion of the overall office market than it is currently.”
JLL predicts the flex space market will return to growth in the second half of 2021, with some operators choosing to share revenues with landlords via management agreements.
One competitor to flex space providers is the huge amount of sublease space on the market, but JLL maintains WeWork is well positioned in this area. The company can accommodate lease flexibility and optionality, enabling companies to pivot on the spot, Finney tells GlobeSt.com. "Subleases very rarely allow pass-through renewal options, expansion rights or similar considerations. WeWork can address all of these concerns, and that is a major differentiator and demand driver in the current market."