Colliers International’s U.S. Flexible Workspace Outlook Report, released on Jan. 25, highlights the current state and future trends of the flexible workspace market, how it is impacting both occupiers and investors, and where opportunity exists for clients.
The report was authored by Andrew Nelson, chief economist, USA, and Ron Zappile, vice president of Colliers’ Corporate Solutions Strategy and Innovation, and local to the tristate region.
According to Collier’s, key takeaways from the report include, fast growth – flexible workspace continues to grow at a rapid pace, now accounting for one-third of office leasing in the last 18 months alone; a focus on enterprise with some flexible workspace providers are aggressively targeting larger corporations or enterprise clients; numerous companies finding value in flexible workspaces providing the right environment to attract and retain the best young talent in the market;
Additionally, firms are leasing flexible workspace for everything from “surge” space to touchdown space for traveling employees to incubators for new products and project teams, among others.
The report found flexible workspace is one of the few growing sources of office demand, although it still makes up only a fraction of the office market with 1.6 percent of all inventory in leading office markets.
Flexible workspace is impacting traditional leasing models and occupier client portfolios, together with the nature of how office space is designed and utilized. Traditional landlords are responding with their own flexible workspace and lease options.
The concentration of co-working space is almost double in tech markets than in other markets. Co-working also concentrates in high-wage markets and cities with a large concentration of professional services firms.
Since the majority of flexible workspace came online after the Great Recession, from late 2007 to mid-2009, its performance during a downturn is untested, but it could provide a buffer to landlords as occupier clients put a premium on flexibility during a downturn. While the growth of major flexible workspace providers, in terms of leasing volume and locations, is undeniable, some providers are highly leveraged with corporate debt and could be susceptible to a market downturn, particularly if office rents start to decline.