The flexible office space imperative

• AI is emerging as a powerful new driver of flex demand. Ongoing workforce transformation from AI makes long-term real estate planning a challenge; flexible space gives organizations the real-time optionality to adapt as AI reshapes team structures and headcount needs.
• The flex sector has stabilized after years of volatility. Operators have been shifting away from risky master leases with management agreements and revenue-share structures, attracting renewed footprint growth and investment activity.
• Corporate adoption remains nascent: only 3% of large enterprises use flexible space for more than 10% of their portfolio. This gap between strategic need and current uptake represents a significant opportunity for occupiers, landlords and investors alike.

After years of volatility, the flexible space sector is back on firm financial footing. Enterprises are realizing the benefits of portfolio flexibility, landlords are exploring partnership opportunities with flex operators, and investors are fueling a new wave of M&A activity.

The transformative potential of AI is making space agility critical. Yet the global office market remains mostly fixed even as space demand grows more dynamic. For enterprises, the value proposition of flexible space has never been more compelling. It offers the speed, simplicity and optionality required to navigate a world where workforce and space needs can change at breakneck speed.

Globally, office utilization averages 54%, a significant 25-point gap from the average corporate target of 79%. This challenge is particularly acute in North America, where the utilization gap reaches 29 points. Yet downsizing is not the definitive answer: 43% of corporate leaders globally expect headcounts to rise in the coming years (JLL Corporate Occupier Trends to Watch Survey).

The paradox of controlling costs while preparing for growth is the primary driver behind the shift to elastic portfolios. This “core plus flex” model converts a portion of real estate into a variable expense. Key benefits include:

• Optimize costs: Align real estate footprints with headcount fluctuations and adapt to technological change throughout business cycles.
• Accelerate occupancy: Pre-built spaces and standard membership agreements allow rapid scaling for special projects, new market entry or talent acquisition.
• Adapt to new ways of working: Shorter lease terms, adaptable space design and geographic diversity enable agility in an era of rapid innovation.
   

Despite these clear benefits, adoption remains in its early stages. Just 3% of corporations globally use flexible space for more than 10% of their portfolio, and 42% allocate 1% or less of headcount to flex solutions, representing vast upside potential for the sector.

Following rapid VC-fueled expansion and a pandemic-induced correction, operators have re-established financial stability by closing underperforming locations, renegotiating leases and streamlining operations. A critical evolution is the shift away from risky, fixed-rent master leases toward financially sustainable partnership models:

• Management agreements: Operators manage space in exchange for a fee, a model favored by Industrious and a growing part of IWG’s strategy.
• Revenue-share structures: Landlords and operators share revenue, aligning financial interests of both parties.
• Franchise arrangements: Operators like Venture X expand by engaging with private entrepreneurs via franchising, particularly in suburban and secondary markets.
   

This shift has renewed investor confidence. Recent milestones include CBRE’s full acquisition of Industrious (2025), Convene’s acquisition of NeueHouse (January 2026), and the acquisition of Vast Coworking by New State Capital Partners and Graycliff Partners (March 2026). Major landlords including Tishman Speyer, Hines and Nomura have also launched proprietary serviced office products.

Historically, tenants turned to flexible space for tactical reasons: managing small headcounts, short-duration projects, speed-to-occupancy and minimizing upfront capital. The rapid advancement of AI adds a far more compelling driver for widespread adoption.

AI is leading to uncertainty around long-term workforce composition and headcount forecasting. Supplementing long-term leases with more agile portfolio management can add significant strategic value when it is difficult to predict which roles will be augmented, replaced or created. Flexible space provides a direct answer: short-duration commitments and pre-built spaces give organizations the optionality to adapt their physical footprint in real time as AI reshapes workforce needs, without being locked into legacy assets that no longer serve their purpose.

While the demand for flexibility is a global phenomenon, adoption rates and market dynamics vary significantly by region:
 

• The Americas: The U.S. has the most mature flexible space market but also faces the largest utilization gap, creating a strong impetus for elastic portfolio adoption. Flex supply is highest in tech hubs like San Francisco (5.3%) and New York (4.2%), with growth accelerating in Sun Belt markets such as Miami and Austin.
• EMEA: London remains a primary global hub. The shift to management agreements is particularly pronounced as landlords seek to de-risk their exposure after past operator insolvencies.
• APAC: This region is more focused on workforce and footprint growth. Employees in markets like India (84%) and China (77%) place very high value on vibrant, amenity-rich locations, making location and experience central to the flex value proposition. Local operators like The Executive Centre hold a strong position alongside global players.

Several years ago, JLL projected that 30% of office space would be consumed flexibly by 2030. This transition is accelerating through a clear lifecycle progression:
 

• 2021-2023: Volatility, including lease terminations, operator restructurings and conversions to management agreements.
• 2024-2025: Recovery, with landlords backfilling closed units and enterprise demand surging on the back of return-to-office.
• 2026 and Beyond: Strategic adoption, with pre-built, short-term spaces becoming standard as AI and workforce transformation make portfolio flexibility a core real estate imperative.
   

Whether the market evolves to meet this projection remains to be seen, but there has been explosive growth of pre-built spaces (spec suites), expanded amenity spaces and shared conferencing, which highlight the strategic shift from privately controlled long-term leases to more flexible consumption.

For corporate occupiers
 

• Treat your portfolio like a platform, not a project. Shift from periodic rightsizing to continuous optimization, integrating utilization data, business forecasts and market intelligence.
• Pilot and partner strategically. Test different operators, locations and deal structures at a small scale to find the best fit before broad deployment.
• Integrate data holistically. Unify CRE, HR, IT and Finance insights to enable evidence-based workplace decisions.
   

For landlords and investors
 

• Assess your portfolio for flex potential. Identify static vacancies and underutilized spaces that could generate new revenue streams and enhance building amenities.
• Choose your model. Weigh the trade-offs between partnering with a third-party operator and building an in-house flex platform, considering operational capability, risk tolerance and asset strategy.
• Invest in foundational technology. Space booking, community management and analytics tools are essential for delivering a seamless user experience and optimizing operational performance.
• Understand valuation implications. A successful flex offering can reduce vacancy and enhance asset value, but income from management agreements is viewed as less stable than long-term lease revenue, and flex operators can impair building values when exceeding 17% of rentable building area.
   

Commercial real estate is evolving from a commodity to a consumer product. Occupiers are demanding more agile portfolios as they prepare for an AI-driven future; landlords are responding with partnership models and pre-built ecosystems; and investors are re-engaging with a sector that has matured into an essential component of modern corporate real estate strategy. The organizations that embrace this shift and treat flexibility as a core capability rather than an afterthought will be best positioned for the decade ahead.