Through the course of the COVID-19 pandemic, many flexible workspace operators struggled or went bankrupt as employees turned to work-from-home methods. However, as more employees are vaccinated and the U.S. begins the process of opening back up, companies anticipate a surge in employees returning to these spaces.
One of these coworking companies is Irvine-based Premier Workspaces, which is continuing to grow by taking over vacant offices left behind from other bankrupt flexible space companies. Through these means as well as through the building of new spaces, Premier Workspaces plans to add 100 new shared work locations in the next several years.
“Work will never be the same after COVID,” Premier Workspaces CEO Jeff Reinstein said. “That’s actually a good thing. We’re delighted to see workers and companies embrace the new hybrid model that utilizes flexible workspaces. This shift has also driven considerable interest from landlords and brokers who want to capture new opportunities.”
Premier began nearly 20 years ago with its bankruptcy acquisition of American Office Centers. Since then, the company has owned or operated 132 shared workspace locations and more than 2 million square feet of office space. In 2020 alone, Premier added five new shared managed office spaces to its nationwide portfolio, according to a news release.
Reinstein said these successes are due in large part to the company’s strategic efforts to make their flexible spaces remain private, which he said has become highly desirable during a time where people are being asked to follow social distancing guidelines. As a result, Reinstein said Premier has seen a consistent increase in activity, with much of it coming from corporate clients looking for remote offices where their employees live.
“It’s a great industry if you have the right business model. Ours is built on 19 years of responsible, profitable growth. We focus on a blend of private offices and meeting rooms in some of the best buildings across the country,” Reinstein said. “As an operator, we never jumped on the open coworking bandwagon because it’s not sustainable as a primary focus. This leaves us well positioned for growth in the current market while others close, sell or reconfigure.”
According to Reinstein, businesses in the future will continue to utilize office space but will also require more flexible solutions as they look to restructure the amount of real estate they occupy.
“While coworking is a great concept for the gig worker looking for community, open coworking is not practical for most businesses who still need a degree of privacy, so we’re seeing a shift back to private spaces. Ultimately, workspace users don’t want forced interaction. They want private spaces with common areas that allow them to interact on their own terms. I think that’s key,” Reinstein said.
“In the coming years, we’ll see a shift as the need for balance becomes more apparent. Large operators are already repositioning. We’ll also see an evolution as businesses of all types and sizes engage flexible workspaces as a solution for remote teams and employees. Overall, these are exciting changes. As a company, we’re positioned to acquire distressed operators as the industry consolidates.”
As the nation continues to reopen, other flexible workspace companies, including Knotel and WeWork, also have begun looking at ways to restructure their business models to fit the changing needs of consumers.
Looking to make their mark in flexible office space, brokerage firm Newmark Group, Inc. announced plans to acquire Knotel in February. This was shortly after the New-York based flexible workspace provider filed for bankruptcy.
“Our acquisition of Knotel’s business was driven by the significant role that flexible office solutions will play in the future of the workplace,” Newmark CEO Barry Gosin said following the acquisition. “Bringing on an experienced executive team that has a clear vision for this vertical, combined with Newmark’s market-leading platform, further positions us as a preeminent global provider of workplace solutions to fit virtually any need.”
Around the same time, flexible work space company WeWork announced its merger with BowX Acquisition Corp., resulting in WeWork becoming a publicly listed company. The transaction values WeWork at an initial enterprise value of approximately $9 billion, and provided the company with approximately $1.3 billion of cash to fund future growth.
Throughout 2020, the company worked to cut costs, trimming operating expenses by $400 million. Additionally, WeWork exited 106 pre-open or underperforming locations as well as executed 100 lease amendments for rent reductions, deferrals or tenant improvement allowances. This resulted in an approximately $4 billion reduction in future lease payments, according to a news release.
“WeWork has spent the past year transforming the business and refocusing its core, while simultaneously managing and innovating through a historic downturn,” WeWork CEO Sandeep Mathrani said in the news release. “As a result, WeWork has emerged as the global leader in flexible space with a value proposition that is stronger than ever.”
While shared workspace operators seek to make similar changes and follow suit on new trends brought on by the COVID-19 pandemic, Reinstein said he believes more remote employees will begin to lean on shared office environments as the U.S. continues to reopen.
“It’s already an attractive solution for small businesses, but we’re seeing new demand from larger companies. Flexible workspaces are a natural fit for remote employees who prefer to work closer to home. They can also be utilized for smaller regional hubs for team meetings and other activities, allowing the company to reduce its footprint and overall expenses. As life returns to normal, workers will seek settings with more social interaction, but they’ll continue to place a premium on private spaces,” Reinstein said.