Flexible workspaces on the rise outperforming the traditional office market

May
2023

Steen Uno

In the wake of the pandemic and the impact of hybrid work, the market for flexible workspaces in the first half of 2023 seems to maintain a convincing growth and increase the distance to the traditional office industry.

May
2023

Steen Uno

Still, halfway through 2023, the flexible workspace continues its significant global growth and successful streak but also a threatening transformation of the traditional office rental market.

The hybrid workflows are explosively motivating employers to opt out of their traditional office rentals and prioritize locations that match the environments where employees have become accustomed to working today.

In the new MatchOffice Industry Survey 2023, four out of five of the interviewed European office providers are reporting a current average office occupancy of over 70% - a quarter of them even more than 90%.

At the same time, many landlords and investors in the US and other global cities also struggle to push the occupancy rates of their often very huge traditional office leases above or even close to 50%.

Splitting market

In these months, the rental industry's experts warn of expected drastic falls in property valuations caused by demands for traditional office leases diving into competition with the flex spaces.

"You can say the development gives office owners and investors of old-fashioned leases obvious market opportunities to diversify their assets instantly with updated flexible products and contracts," MatchOffice CEO Jakob Dalhoff says.

Hybrid work patterns strongly motivate employers to drop out of traditional leases
and prioritize locations that match the environments where office employees have
become accustomed to working today. Photos: iStock

"After the pandemic, global office companies have been busy with, but also to a large extent, successful at prioritizing their employees' new needs for flexibility, experience and well-being.

Everything indicates that up through 2023, we will see the global market for flexible workspaces further accelerate its growth, driven by the popularity of the new hybrid workflows and the growing demands for cost-effective flex offices," Jakob Dalhoff adds.

Still increasing

The MatchOffice Industry Survey 2023, based on current responses from 1,421 office companies in 58 countries, shows that more than one in two (56%) European providers expect further increases in their office occupancy in the second half of 2023.

73,6% of the responding European providers of flexible workspaces maintain the same initial contract length as in 2022. The need to request shorter contracts appears to decrease significantly compared to the last post-pandemic year.

The MatchOffice Industry Survey 2023 reports that four out of five European office
providers display an average office occupancy of over 70%, a quarter of them even
more than 90%. MatchOffice Graphics

"Not only has the flexible office environment enabled companies to realize significant savings at a time when many are still struggling to recover from the financial losses of the pandemic.

In particular, the flexible workspace has achieved its stormy popularity among office workers because it can offer them a pleasant relaxed atmosphere as well as accessibility and social contact with colleagues when they are calling for it," Jakob Dalhoff comments.

Need for rethinking

Also, the MatchOffice Industry Survey 2023 reports that half of Europe´s office providers, barely halfway through 2023, can look forward to higher rental prices than last year.

55.1% of these reporting European operators expect stabilized rental rates in the remaining months of the year - 33.1% assess there might be opportunities to cash in on moderate price increases.

"Everything indicates that up through 2023, we´ll see the global markets for flexible
workspaces further accelerate its growth, driven by the enormous popularity of the
hybrid workflows," MatchOffice CEO Jakob Dalhoff comments.

Similar current surveys all confirm that office workspaces and environments of the future will be flexible, hybrid and decentralized in their interior, design and administration.

Therefore, crisis-stricken traditional office leases are under pressure, and they must urgently rethink new technologies, creativity and social spirit in their present space functions and facilities.

Equipped for growth

"The office rental industry is struggling fiercely to adapt to the changing client needs by offering them greater flexibility, technology-enabled services, safe working environments and much more.

The market is strengthing with new upcoming players and partnerships between established operators. However, the flexible workspace seems comfortably equipped for continued growth and innovation," Jakob Dalhoff points out. ●

The MatchOffice Industry Survey 2023