Flexible work will survive despite gloomy signals from WeWork and Zoom

WeWork's future is in doubt. And Zoom Video Communications, the pandemic poster child of remote work, just told its employees to get back to the office. The headlines suggest flexible work is on the ropes - but it's actually thriving.

The owner of co-working giant Regus - think WeWork, but with better cash flow and no leadership drama - just posted its best six-month sales period ever, thanks to a growing list of customers that includes Zoom. LiquidSpace, a digital marketplace where clients like T-Mobile and the federal government find and book on-demand office space, has seen transactions soar this year.

The share of companies offering location flexibility, meanwhile, increased to 61% in July from 51% in January, according to Scoop Technologies, which helps firms manage hybrid workforces.

So, despite the news from WeWork and Zoom - and the push by companies like Walt Disney to get workers back in offices most of the week - there's a growing body of research, trend data and surveys showing that flexibility matters. Work is now a thing we do, not a place we go. Offices play a role, but not the central one they've held for decades.

"The narrative hasn't yet caught up with reality - and the reality is large corporations globally are moving to a much more flexible approach to how they support their people," Mark Dixon, chief executive officer of Regus owner IWG, said on a call with analysts Tuesday. "They are moving towards hybrid working. It's universal, and it's gathering pace."

IWG provides a good example. There, revenue rose 14% in the first six months of the year while operating profit more than doubled, thanks to 400 new co-working spaces coming on board. Some office landlords, saddled with stagnant occupancy rates and ballooning debt payments, are looking to co-working as a potential lifeline. More than 10,000 building owners have reached out to IWG about starting a co-working arrangement, Dixon said Tuesday. With 34% of leased U.S. office space due to expire by 2025, according to brokerage JLL, Dixon expects that pipeline of potential customers to grow.

Dixon's optimism contrasts with WeWork's gloomy outlook. That company said Tuesday there's "substantial doubt" about its ability to continue operating, citing sustained losses and canceled memberships to its office spaces. While WeWork is the best-known in the co-working space - thanks to its cinematic rise and fall - it's just one player in a growing sector that now includes about 5,000 vendors offering 15,000 locations, according to LiquidSpace founder and CEO Mark Gilbreath. He opened his first co-working space in Boise, Idaho, in 2008, two years before WeWork emerged.

The typical hybrid worker is using a flexible office 32% more today compared with pre-pandemic levels, Gilbreath said in an interview. Businesses have figured out that there are both economic and cultural advantages to detaching from long-term office leases and giving employees some choice on where and when they work, he said.

While just a third of corporate real estate executives surveyed by CBRE said flexible office space made up a significant part of their portfolio today, half of them expect that to be the case within two years.

It's still important for employees to gather together, "but 'return to office' is the wrong framing because gathering can happen not just at the office but anywhere where it's efficient and feasible and sustainable," Gilbreath said. "Hybrid is the new normal."

Zoom's new policy acknowledges that reality. The videoconferencing company began nudging employees back into its offices earlier this year, and now says that those living within 50 miles of an office need to be on-site two days a week. The move surprised some, given Zoom's business revolves around connecting workers in disparate places, but workplace experts didn't flinch.

"It's not that they're not hybrid working," IWG's Dixon said. "I know exactly how they work - they're one of our customers. But what they want is people to come together and collaborate certain times in the month because you can't have everyone working remotely all the time."

Zoom's shift simply puts it in line with its peers. "Our long-term health is closely tied to the extent we embrace a hybrid workstyle, which many of our customers embrace," Zoom CEO Eric Yuan said in an Aug. 3 memo obtained by Bloomberg.

Among employees who can work from home, the most common arrangement by far is hybrid, according to WFH Research, a group of economists who have been analyzing remote-work patterns since the pandemic began.

To be sure, the share of work done remotely in the U.S. has declined somewhat over the past year, according to WFH Research economist Jose Maria Barrero, but it's not going away. More than half of business leaders in multiple countries surveyed by McKinsey & Co. expect remote work to increase in the future, and when given the option to work remotely, most Americans take it.

Despite caricatures of fully remote workers lying on the couch in their pajamas all day, the truth is that nearly half of them meet up with co-workers at least once a month, WFH Research has found.

Increasingly, those meetups are happening outside of traditional offices. A survey of 14,000 full-time office workers from architectural firm Gensler found that Americans spent 28% of their workweek outside of their company's office and their home, usually in a co-working space, client site or a cafe. Startups like Portland, Oregon-based Radious have emerged to make those gatherings easier. Co-founder Amina Moreau wants her firm to be the Airbnb of flex work, offering homeowners the chance to rent out their home offices to businesses.

Radious now has about 150 places available and will soon move into its third U.S. market. While the company focuses on small- to medium-sized firms, Moreau said she has picked up some former WeWork members.

"Our spaces are in the burbs, where people live, reducing commute times," she said. "They also love that our spaces are private, whereas WeWork is a zoo of noise and distractions."