As Urban Office Reawakens To New Era, Flexible Spaces Reign

After years of uncertainty, urban centers across the U.S. are reawakening. Sidewalks and transit lines have a familiar bustle. Restaurants, retail and entertainment venues are getting their buzz back.  

But the broad adoption of hybrid work policies has permanently interrupted the once-mighty ebb and flow of the daily commute. Workers at more than 80% of U.S. companies can choose from a variety of workplaces to match their needs on any given day, representing an existential threat to the traditional office.

Amid the most challenging environment for the office industry in decades, international flexible office provider Serendipity Labs is experiencing surging demand for inspiring workplace options in cities that support hybrid work, Chairman and CEO John Arenas said. Best known for being an early pioneer of coworking in suburban markets, Serendipity Labs has resumed opening urban hub locations to complement its suburban spoke location network.

“Traditional office tenants are now reconsidering their space needs as they deploy hybrid workplace strategies to achieve productivity gains and retain talent,” Arenas said. 

In recent months, Serendipity Labs added city center locations with top institutional asset owners to meet the hybrid work demand, he said. These include in New York City with the Durst Organization and in Downtown Los Angeles with DEKA Immobilien.

In this new work era, the word “office” is being used more as a verb referring to a set of activities rather than a place.

This can be seen in the actions of tenants who are significantly reducing office space requirements on lease renewal based on employee behavior. 

Christelle Bron, CBRE agile workplace practice leader, said urban markets continue to see the lion’s share of demand for flexible office desk requirements from corporations.

“With the adoption of hybrid workplace policies, traditional leasing space requirements can be reduced by as much as 20%, creating an increased demand for overflow offices and meeting and event spaces,” Bron said. “Trophy assets with full suites of building amenities, including flex office suites, have been particularly attractive for occupiers, commanding higher rents and lower vacancy rates in most U.S. markets.” 

With collaboration and connection being the top reasons for commuting to the office, according to CBRE research, office visits are shorter and less frequent, leading to lower overall space requirements. 

Data from commercial real estate information company CoStar shows the average U.S. office lease size in 2023 was 3,240 SF, a figure that has been falling steadily since 2015. This average office space size requirement accommodates fewer than 25 workers, which is in the sweet spot for the flexible office value proposition. 

A CBRE Research survey revealed that 50% of office occupiers predict flexible space will make up more than 10% of their office portfolios by 2025.

After a few decades as executive office suites, a new kind of shared workplace emerged during the Global Financial Crisis of 2008.

“Coworking 2.0 took center stage in the urban zeitgeist that attracted young creatives and startups with their taste for a fun-infused hustle culture and community,” Arenas said. “Then came hazy, venture capital-driven blitz-scale growth, right into the jaws of the pandemic.”

The sudden absence of demand from companies that had gone fully remote or stopped growing led Coworking 2.0 to falter, he said. What remains today are more stable, flexible office brands with sophisticated demand-generation capabilities and low-leverage business models. 

This Coworking 3.0 has finally gone mainstream, aligned with landlords who need to offer tenants more flexibility and service to make their buildings competitive. 

“Now known as flexible office, Coworking 3.0 is an outsourced workplace solution widely used by the most sophisticated multinational companies as flexible, fully serviced alternatives to conventional long-term office leasing,” Arenas said.  

Flexible office is poised for another moment, he said. Flexible workplace providers like Serendipity Labs are aggregating high-credit, quality demand and delivering inspiring, compliant workplaces as an integrated part of the product set for office buildings. 

Arenas said his company is partnering with landlords to manage tenant amenities, shared work lounges, conference centers and event spaces, and to operate flexible office facilities along with fully serviced and furnished pre-built suites. 

“This all adds value to every square foot in every building,” Arenas said. “It is exciting to be creating value in the office industry as it transforms itself to address the new era of distributed work.”

This article was produced in collaboration between Serendipity Labs and Studio B. Bisnow news staff was not involved in the production of this content.

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