WeWork Flopped. Have Flexible Offices?

livemint.com:

Flexible working isn’t turning out to be the boon for flexible-office providers that it might seem. WeWork co-founder Adam Neumann lamented this week that the company he used to run failed to take advantage of “a product that is more relevant today than ever before." Although he didn’t mention his own role in WeWork’s downfall, he has a point. Demand for flexibility is strong as companies try to strike a balance between the traditional office and letting employees work at home.

But co-working spaces that tout flexibility are struggling even more than traditional landlords in the postpandemic office market. WeWork’s offices in the U.S. and Canada were only 69% full earlier this year.

The company will now use the bankruptcy process to break leases with some landlords to improve this number. Its main rival IWG, also known as Regus, doesn’t disclose how full its American locations are, but says the rate is roughly similar to the company’s 74% global average. That leaves both businesses well below the U.S.

national average occupancy rate of around 83%. Co-working never really took off in earnest in the U.S., although WeWork and IWG have a big presence in major cities like New York and San Francisco. Flexible office providers have a small 1.6% share of the North American office market, according to CBRE data.

This has shrunk from a peak of 2% before the pandemic, as WeWork has been closing its weakest locations. One reason why the sector remains small is that WeWork and IWG’s offices mainly appeal to startups, particularly in the tech sector. Big companies do sometimes use co-working space—if they are opening a regional hub, say—but never took to it in big numbers.