Social distancing requirements and the shift to remote work came as a big blow to co-working and flexible workspace companies last year, but analysts say they’re bullish on the space’s prospects later this year as mass vaccinations will lead to a lot of people returning to the office.
Co-working firms such as WeWork and IWG operate numerous office spaces across the U.S. and in other countries, subletting it employers and freelance workers on short-term contacts. It was a popular business model but it went downhill rapidly last year as tenants vacated those premises in the wake of COVID-19.
But investors and analysts say the co-working space is likely to enjoy a rebound once people can get back to work.
The industry badly needs a rebound. WeWork, which tried to adapt by promoting its outdoor office spaces, nonetheless saw its global occupancy fell to just 47% in 2020, and it lost $3.2 billion that year, according to the Wall Street Journal. The potential remains though, as prior to the pandemic, co-working spaces were the fastest-growing type of office space within the commercial real estate sector.
Traditional property service providers have fared better during the pandemic as their tenants were locked into long-term leases, which meant building owners could still collect rent even though their premises were empty.
In light of this, analysts say that many businesses may be drawn to shorter-term leases in future as they allow companies to hedge their bets against any future disruption. They’re also likely to be more practical in an age where many firms are likely to adopt hybrid work policies, with people working remotely as often as 3 or 4 days a week, and only visiting the office for essential face to face meetings with their colleagues. If that’s the case, then co-working spaces will be a very attractive option.
“Co-working spaces have the potential to provide vital business services to support the remote workforce closer to where they are, especially as residual anxieties linger over taking public transit,” said Brent Capron, design director of interiors at architecture firm Perkins and Will’s New York studio, in an article for CNBC.
Real estate analyst firm JLL has previously said that it believes flexible leases could grow from just 5% of the commercial real estate sector today, to as much as 30% by 2030. The Journal said that many companies will be reluctant to sign 10-year leases in future as they better understand what the future of work is going to look like, and that will involve more employees dividing their time between home and office.
“Some may turn to looser office arrangements longer term, accelerating a trend already building before the pandemic,” the Journal said.