Buildings of the future are powered by technology: Part 7

We asked Matt Himmelsbach, Managing Director, Flexible Office Practice, Newmark, to share his insights on flexible workspaces, as part of our series into the buildings of the future.

What are the biggest challenges facing the flexible workspace market?
Flex office owners and operators are simultaneously navigating economic headwinds and the volatile state of the leasing market. Additionally, tenant company structure changes may influence the organizations’ leasing and office space strategy. For example, in the tech industry, a predominant consumer of flex office space, some companies may re-evaluate future lease agreements due to workforce reductions. However, while numbers are down, flex offices continue to see an increase in leasing deals overall.

What are the biggest opportunities for the flexible workspace market?
Most companies want leasing flexibility, and coworking solutions are often considered the best strategy. As acceptance and adoption of these workplaces continue to increase across industries of all kinds, there will be a subsequent growth in the amount of flex space coming onto the market.

In terms of rental rates, flex office and coworking space operators in Miami, New York City and San Francisco are taking advantage of lower base rents for long-term leases; a strategic move to remain viable and maintain lucrative operations in the evolving post-pandemic office market.

What keeps you up at night? Tell us about the biggest pain points you encounter when implementing flex space.
As flex office popularity swells, office location and preferred available space will be temporarily limited due to the growing number of remote or hybrid workers. Currently, companies utilizing a flex strategy must be promptly proactive to secure flex space options and avoid potential delays. However, in the long-term market outlook, the expected growth of supply will provide tenants more opportunities and optionality.

What are the biggest benefits of a flexible real estate strategy?
Flex real estate strategies offer the financial flexibility of short-term leases and access to fully furnished spaces in highly amenitized Class A buildings that were previously out of reach, especially for start-ups and small companies. Additionally, signing a flex lease often reduces traditional office management as cleaning services, utilities and consumable/office supply stocking are included.

What role does/can technology play in delivering flexible workspace?
To support the predicted market growth and adeptly manoeuvre the evolving sector, flexible office players require an increase in the amount of available technology. The fluctuating nature of flex offices and month-to-month leasing agreements depend on sophisticated management systems for inputting tenant information and data onto the necessary internal and external listing platforms.

For a long-term, adaptable flex workplace strategy, the fluctuating nature of flex offices and month-to-month leasing agreements depend on sophisticated portfolio management systems to input tenant information and data onto the necessary internal and external listing platforms. Innovative and intuitive portfolio management platforms like Newmark’s Optality allow businesses to quickly adjust real estate strategies and manage associated costs to meet shifting market demands with real-time, trackable office utilization data.

What does the future of flex look like to you?
Over the next decade, sustaining hybrid and remote work through flex office and coworking spaces will likely become a standard part of any company’s portfolio. As one of the fastest-growing verticals in the commercial real estate industry, market intel shows the global flexible office market is poised to expand at a compound annual growth rate (CAGR) of 16.85% over the next 5 years, reaching over $113.6 billion.

Currently, flex offices make up 3.5% of the overall office market; however, the market predicts that the sector will balloon to be between 6% and 13.5% of the office market by 2030.

Read more insights from the industry experts:  
Part 1 with Faye Stutts, National Director of Coworking Partnerships, Vari.
Part 2 with Davey Friedman, Vice President, Real Estate at Arch Amenities Group.
Part 3 with Mark Burge, President, Flex Workspace Solutions.
Part 4 with Michael Kloppenburg, Vice President, Avison Young.
Part 5 with Jamie Russo, CEO, Everything Coworking.
Part 6 with Liz Elam, Founder of GCUC Global.