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The State of Flexible Office Space
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Flexible Office Space

CBRE Research

 

The State of Flexible Office Space

Once considered a niche offering, flexible office space has become a prominent component of building owners’ and corporate occupiers’ real estate strategies. As such, it represents a structural shift in office leasing that will survive—and perhaps thrive—in an economic downturn.

This shift has come at a time when business models predicated on sharing, such as Airbnb and Uber, have disrupted traditional industries. While the real estate industry is rarely a first mover, especially with trends that might disrupt how it is valued, the explosive growth of flexible office space this late in the economic cycle is not surprising.

Flexible office space has long been a viable solution for freelancers, remote workers and startups. Now it is rapidly gaining ground among large enterprises because of its flexibility, speed and capital deferral—benefits not widely available through traditional leasing. Enterprise use of the flexible space model is essential to drive the continued exponential growth of this sector.

Landlords are finding increased demand for flex offerings. Traditional landlord-operator lease agreements are giving way to a range of models that change risk and reward dynamics for both parties. Some landlords are even introducing flex offerings under their own brands. Investors’ support for this new form of real estate income will ensure further growth of the sector.

History Of Flexible Office Growth

Since 2010, flexible office supply has increased by more than 600% for an average annual growth rate of 26%. The annual rate as of H1 2019 was 34% and the 2019 growth estimate is projected to be 36%. Flexible space now totals almost 71 million sq. ft. across the 40 markets tracked by CBRE. Despite this growth trajectory, flexible office space as a percentage of total office supply (i.e., penetration) remains minimal at less than 2%. International markets like London and Shanghai currently have 6% of their total office supply made up of flex space.

This report explains how flexible offerings have caused a structural shift in the U.S. real estate industry. It also explores potential growth opportunities and the sector’s likely prospects in a recession scenario.

Posted on Wednesday, Jan 22, 2020 - 04:38:00 PM EST
   By Mitchell Blaine - CB Richard Ellis Limited - Visit Our Business Directory Listing  |   Return to Blog 

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