Part of CBRE's Agile Real Estate Knowledge Hub
Already Muted Expansion Mired by COVID-19
- The COVID-19 pandemic has forced some states to impose strict stay-at-home orders that are adversely affecting many industries. This is leading the U.S. economy into a recession that will result in very sharp declines in GDP for H1 2020 and in job losses, particularly in the retail, food & beverage and transportation sectors.
- While some flexible office locations have temporarily closed, those that remain open are experiencing little to no use given shelter-in-place restrictions. Many operators are entering rent renegotiations with landlords to remain solvent. Several small flex operators have permanently closed.
- Flexible office commitments1 totaled 1.0 million sq. ft. in Q1, remaining at a muted level for the second consecutive quarter. For the four quarters ending Q1 2020, commitments from flex operators were down by 32.1% year-over-year. For the first time since its founding, WeWork accounted for no commitments this quarter. Other providers postponed any expansion plans.
- Hana accounted for 18.2% of new flex commitments in Q1, while Serendipity Labs accounted for 11.8%. The top five most active operators accounted for 60.1% of new commitments in Q1 vs. 87.9% in Q4 2019. The majority of commitments were made early in the quarter before the COVID-19 outbreak.
- Manhattan and San Francisco grew their shares of activity in the top 10 markets to 27.9% and 9.6%, respectively—well below average levels of activity in those markets.
1New flexible office space committed to via a traditional lease agreement, other management or partnership agreement, or owner/operator building purchase.
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