Virus to Boost Demand for Flexible Office Market, Workspace Says

(Bloomberg) --

The coronavirus outbreak may have sent most office workers into their homes, but Workspace Group Plc sees demand growing for their flexible offices.

The office leasing market is struggling to cope with the sudden drop in rental income. If firms can survive that immediate threat, demand will ultimately surge, according to Chief Executive Officer Graham Clemett.

“We will undoubtedly see subdued levels of operational performance in the short term with a reduction in rental income,” Clemett said Friday in an earnings statement. “However, we expect that the structural shift in the office market towards flexibility will now accelerate more broadly.”

The coronavirus outbreak has posed a grave threat to flexible office operators as companies grapple with widespread lockdowns to combat its spread. But the pandemic has also raised questions about corporations’ long term office needs which could push more companies to pay a premium for flexibility instead of signing up to long term leases with little scope to contract and expand during volatile periods.

Workspace, which owns its properties and therefore has more flexibility to adjust rents compared to rivals We Co. and IWG Plc, has offered its customers 50% discounts until the end of June, as well as rent deferrals on a case by case basis. It’s so far managed to collect about 70% of the rent due this quarter, net of the discounts, according to the statement.

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