As their teams return to the office, many enterprise companies are rethinking their relationships with flexible workspaces.

That was the topic at hand on a recent episode of The Weekly Take, CBRE’s* commercial real estate podcast, hosted by Spencer Levy, Global Chief Client Officer and Senior Economic Advisor at CBRE, with guests Christelle Bron, Leader of the Americas Agile Real Estate Practice at CBRE, and Jamie Hodari, CEO and co-founder of Industrious.

“We are in the heart of a moment right now where there’s an extraordinary rush to use flex,” Hodari said on the podcast. “There are some cities that are lagging, but it’s happening all across the country. They are definitely buying flex in volumes that exceed what you saw pre-COVID.”

Read on for six takeaways from the episode. Or, listen to the full discussion here.

Flexible Workspaces Reach an Inflection Point

Flex space has gone from an overflow solution to being a key player in many enterprise companies’ real estate portfolios.

“Twenty years ago, someone would use what we do for swing space — maybe they’re building out their headquarters, they need a spot for 18 months to park themselves while they do that,” Hodari said on the podcast. “And now for the first time, it’s a more structural solution.”

The reason? Hodari argues on the podcast that, fundamentally, companies that use flexible workspaces are outsourcing their employees’ workplace experience: “There’s an inflection point in a lot of outsourcing industries, which is the moment when a provider gets good enough to walk in the room and say to the client [that] it’s not just that [we’re] faster or cheaper or more flexible; it’s that we can do this as well, if not better than, when you do it yourself. And this industry, the flex industry, I think, only hit that inflection point about three or four years ago.”

Secondary Markets Lead the Way

Within the U.S. New York is dominating the surge in flex, along with smaller outliers — such as Austin, Texas or Bellevue, Washington.

“I think where we see strong performance is in mid-sized cities or large cities where companies have always meant to have an office, but they never did. Atlanta, Charlotte, maybe even Dallas would fit that, where over the last year and a half it’s become clearer that it’s not that hard to run a nationally-distributed company,” Hodari said on the podcast.

Globally, “what COVID really activated is those secondary and tertiary markets,” Bron said on the podcast. “[Companies] can offer a better lifestyle to their employees and tap into a lower-cost labor pool and then they can … test the market and see how it goes.”

The Network Effect Takes Hold

There are certain products and services whose value grows with usage. Take ride sharing services: The more drivers a service has in one city, the quicker it can respond to requests for rides. And the more cities it enters, the more useful the service becomes.

This phenomenon is known as the network effect. Hodari argues on the podcast that having workplaces you can access across the country “is becoming more and more and more powerful as people start to work in a more distributed way, which in turn puts pressure on really having a robust national network versus just being in a couple cities.”

“The next frontier is the office as a network of places and in your app at your fingertips,” Bron said on the podcast. She imagines a world in which you can not just go online to book your workplace for the day, but also your desk, so that if you want to collaborate with a colleague, for example, you can reserve a seat next to them.

Landlords View Flex as Amenity

Flexible workspace is one of the top two amenities tenants are looking for in CBRE’s occupier survey, according to Bron. Landlords are taking note.

“What we’ve seen during COVID … is the landlord … starting to understand that flexibility is an amenity in the building,” said Bron on the podcast. “Landlords are getting into the game, too, and saying, ‘OK, this is a service I need to provide to my tenant in my building.’ So [flex is] here to stay.”

Enterprises Embrace Experimentation

Companies realize that not only do they not know how their employees will want to work — whether that’s entirely in-person, entirely remote, or hybrid — but also that they won’t have an answer for some time. As a result, many see this period as a moment to trial different ways of working.

These companies are saying to employees: “Here are desk passes, here’s an app. Go and work wherever you want. We’re going to track it. We’re going to measure it. We’re going to have a feedback loop. And we’re going to learn from this data … and then we’ll revise and we’ll adapt our portfolio based on what you’re — you’re voting with your feet,” Bron said on the podcast. “It’s a cost-effective way to test it, to survey your employee in a real way and be able to be adaptive into your model.”

Employee Choice Endures

The idea of employees voting with their feet wasn’t commonplace before the pandemic. Today, however, employees have greater say over where and how they work. Hodari believes that’s here to stay — and that flex space providers’ ability to cater to employees will determine the potential for future growth.

“Employee choice is very durable,” Hodari said on the podcast. “If what we do remains something that on-the-ground employees … prefer, you’re going to see this industry continue to grow by leaps and bounds.”

*CBRE has a significant minority stake in Industrious.