June 2022 marked the end of Q2 and we’ve prepared a detailed summary of our observations throughout the past quarter. The flex market is still recovering from the pandemic and hasn’t reached the levels from 2019, yet. Below, you’ll find more information on the movements.
The FlexIndex closed Q2 2022 with a stable 4.8 fp (flex points). This score was initially reached in March 2022. As per our expectations, the seasonality effect of Easter celebrations impacted the Index negatively and in April 2022 reached 4.5 fp. After that, in May and June 2022, the Index trend was restored and stabilized at 4.8 fp.
We were hoping for a faster recovery and to see the FlexIndex above the 2019 benchmark during the last quarter. Unfortunately, the market is still ~4% below the 2019 baseline.
Two of the KPIs – ‘Static Desk Occupancy’ and ‘Average Booking Duration per Paid Meeting Space’ – are now constantly above the 2019 benchmark, with continuous improvement but yet not being able to compensate for the slower recovery of the bookings related KPIs.
For the upcoming summer quarter we are expecting an interesting dynamic of the FlexIndex. In July we are expecting to have a minor improvement of the Index or in the worst case to remain stable. Most likely, we will observe another dip in August followed by immediate recovery in September 2022. Again, the seasonality effect of the booking related KPIs will have a major role.
Now, here are our most important findings about the 5 FlexIndex KPIs:
For comparison here’s the monthly dynamic of all index components against the 2019 baseline.
1. The ‘Static Desk Occupancy’ has reached 5.7% above the 2019 benchmark and we are expecting to continue the positive trend.
The observed cooling-off in March 2022 is a seasonal trend matching the pattern from previous years. The following recovery in Q2 2022 met our expectations from the previous quarterly release. Most likely we will see the KPI above the pre-COVID level in July 2022.
2. Revenue per Available Workspace (RevPAD) – as expected this KPI follows a similar pattern to ‘the Static Desk Occupancy’. The recovery trend is slightly slower. At the end ofJune 2022 this KPI is ~4% above the 2019 benchmark.
We also plotted the monthly dynamic of ‘Static Desk Occupancy’ and ‘RevPAD’ against the 2019 baseline for a comparison of both metrics.
Having both KPIs on the same chart reveals even more interesting insights. ‘RevPAW’ grew rapidly after Q1 2019, driven by the increased demand for flex offices and the lower elasticity of the supply for flex offices. In April 2019 ‘RevPAW’ even rose above the ‘Desk Occupancy’ trend. This dynamic remained the same until the lockdowns started.
Between April and Sep 2020, both KPIs synchronized. After that, the ‘Static Desk Occupancy’ KPI degradation slowed down, while the ‘RevPAW’ negative trend continued. This opened a gap between both KPIs, which is still there as of the time of the index calculation.
Our expectations that in 2022 the gap between both KPIs will start closing, became reality. We are considering this as an indicator for balancing the supply and demand of the flex offices.
3. Bookings per Meeting Space KPI is the most significantly impacted KPI by the pandemic. There was a tremendous drop in March and April 2020, following the global lockdowns.
Our expectation for a slight slowdown in April 2022 (similar to the trend observed in the previous years), followed by stabilization in May and June 2022, is met. Unfortunately, ‘Bookings per Meeting Space’ is still far from the 2019 benchmark, with a gap of ~19.2%, which is this KPIs’ best result since the global pandemic started.
In April 2020, this KPI was 82% below the 2019 benchmark, clearly showing how easily this part of the flex office business can be affected by any external factors. We could consider ‘Bookings per Meeting Space’ as one of the important, early signals for the health of the flex operators’ business but could be highly influenced by seasonal effects.
4. Average Booking Duration per Paid Meeting Space was also severely impacted by the pandemic. This KPI hit bottom in March/April 2020 and is since slowly recovering.
As of March 2022, ‘Average Booking Duration per Paid Meeting Space’ is the first bookings-related KPI to reach and even surpass the 2019 baseline by 1.1%. Unfortunately, during the last 3 months April – June 2022, this KPI is stabilized below the 2019 benchmark and closed the Q with 4.4% below the baseline.
5. For the final booking KPI — Booking Revenue per Paid Meeting Space — was also recovering well. Prior to the pandemic, ‘Booking Revenue per Paid Meeting Space’(6) and ‘Paid Booking Duration per Paid Meeting Space’ had very similar tendencies compared to the 2019 monthly average rates.
However, after May 2020, booking revenue has a higher deviation from the benchmark. Since Sep 2021, the gap has been closing slightly and almost vanished in Q2 2022. As of June 2022, ‘Booking Revenue per Paid Meeting Space’ is ~5.2% below the baseline.
We were expecting the fastened recovery trend ‘Paid Booking Duration per Paid Meeting Space’ to continue and in Q2 to be the second booking related KPI breaching the 2019 baseline. Unfortunately, this didn’t happen and most likely there will be an additional slowing down due the upcoming summer period.
Lastly, here’s the monthly dynamic of all booking components plotted against the 2019 baseline.
For the upcoming summer quarter we are expecting an interesting dynamic of the FlexIndex. In July we are expecting to have a minor improvement of the Index or in the worst case to remain stable. Most likely, we will observe another dip in August followed by immediate recovery in September 2022.
The recovery trends of ‘Static Desk Occupancy’ and ‘RevPAW’ will continue but maybe with a slower pace. Unfortunately, this won’t be enough to compensate for the expected drop of the bookings-related KPIs.
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