{"id":21167,"date":"2019-02-14T11:55:08","date_gmt":"2019-02-14T09:55:08","guid":{"rendered":"https:\/\/www.commercialcafe.com\/blog\/?p=21167"},"modified":"2025-02-07T11:21:32","modified_gmt":"2025-02-07T08:21:32","slug":"uncertain-future-flexible-workspace","status":"publish","type":"post","link":"https:\/\/www.commercialcafe.com\/blog\/uncertain-future-flexible-workspace\/","title":{"rendered":"Colliers Report: An Uncertain Future for the Flexible Workspace?"},"content":{"rendered":"

The <\/span>flexible workspace<\/a> sector<\/span> is starting to impact the commercial real estate world as more providers and business models enter the market, according to a recent report.<\/span><\/p>\n

The market is growing at a compound annual growth rate of almost 50% in the U.S., with flexible workspaces accounting for one-third of office leases in the last 18 months.<\/span><\/p>\n

However, the Colliers <\/span>U.S. Flexible Workspace Outlook Report<\/span><\/a><\/em> states that \u201ccoworking\u2019s footprint is still quite insignificant\u2014only 1.6% of all office space in the markets we surveyed.\u201d What\u2019s more, the report notes that the pace is slowing as the market matures. <\/span><\/p>\n

So, what does the future hold for flexible workspaces in the U.S.? The report reveals several important insights:<\/span><\/p>\n

Coworking space abounds in NYC<\/h2>\n

The survey identified more than 27 million square feet of flexible workspace in 19 markets across the U.S. Almost 40% of that space is located in <\/span>Manhattan<\/span><\/a> and another 12.7 million is spread across 10 leading office markets, with four million in nine secondary markets. Interestingly, growth rates for flexible workspaces in the primary and secondary markets were virtually identical between 2016 and Q2 2018.<\/span><\/p>\n

Dallas<\/a>, Raleigh-Durham, Boston<\/a>, and Seattle<\/a> were the fastest-growing flexible workspace regions, in terms of percent growth. Philadelphia and Miami<\/a> realized the slowest growth rates out of all the U.S. regions. <\/span><\/p>\n

In terms of inventory growth, Manhattan was well ahead of other areas, adding more than 3.3 million square feet of coworking leases between 2016 and Q2 2018. That\u2019s three times higher than Boston, which was the area recording the next-biggest inventory growth.<\/span><\/p>\n

The top 10 coworking providers lead the pack<\/h2>\n

The top 10 operators account for 80% of flexible workspace in the U.S., leasing almost 23 million square feet of flexible workspace. Smaller operators–defined as any firm outside the top 10–account for just over five million square feet of flexible workspace.<\/span><\/p>\n

WeWork accounts for more than 45% of flexible square footage. This high proportion is thanks to a large amount of space used by WeWork, an average of 79,000 square feet of space per site. Regus owns the highest number of sites (224) but only uses 21,000 square feet of space per site.<\/span><\/p>\n

Coworking spaces now have corporate appeal<\/h2>\n

Flexible workspace providers are now focusing on attracting large corporations and enterprise clients, according to the report.<\/span><\/p>\n

Several core motivations for corporates using flexible workspaces are identified, including the ability to try new locations thanks to flexible and short-term leases, reduced capital expenditure, the opportunity to work in a creative environment, access to the startup community and the ability to accommodate temporary swings in headcount.<\/span><\/p>\n

Flexible workspaces are talent magnets<\/h2>\n

Companies are now using flexible workspaces to attract and retain their top talent. The report states: \u201cTraditionally, firm locations were governed by the location of senior executives, and the rank and file workers followed. The logic is now reversed: corporations are now going to where the young talent is instead.\u201d<\/span><\/p>\n

\u201cWith companies in intense competition to attract the brightest minds, they must be creative about their working space to draw them in, with amenities that appeal to younger workers.\u201d<\/span><\/p>\n

Different work environments to suit different needs<\/h2>\n

Flexible workspace operators are using three basic environments to meet the needs of different occupiers, the report reveals. <\/span><\/p>\n

First, executive suites provide a traditional office space akin to Regus. Second, hotel-curated spaces offer high-end and tailored spaces for professional clients. Last, mainstream coworking spaces offer the flexibility and high worker densities of spaces such as WeWork.<\/span><\/p>\n

Shared space providers offer alternative leasing models<\/h2>\n

\u201cThe workplace is increasingly becoming more digital and mobile. There is a growing corporate need for flexibility and an efficient way to work with leasing accounting changes,\u201d according to the report.<\/span><\/p>\n

As a result, operators need to adapt by providing alternative leasing models. For example, an occupier may want to take a long-term lease for its core operations and uses flexible workspaces for surges in headcount. Alternatively, a business may use a long-term lease for its main headquarters and use flexible workspaces to provide a series of satellite locations for its mobile workforce.<\/span><\/p>\n

The future of flexible workspaces<\/h2>\n

The longevity of the flexible workspace market is questioned by the report, which states: \u201cSince the vast majority of flexible workspace came online after the Great Recession (late 2007 to mid-2009), its performance during a downturn is untested, but it could provide a buffer to landlords as tenants seek short-term, flexible space.\u201d <\/span><\/p>\n

We now need to test the economics of the flexible workspace market, according to the report, which concludes: \u201cWhile the growth of major providers, in terms of leasing volume and locations, is undeniable, some providers are highly leveraged and could be susceptible to a market downturn, particularly if office rents start to decline.\u201d<\/span><\/p>\n

\"\"<\/a><\/p>\n

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<\/div>\n","protected":false},"excerpt":{"rendered":"

The flexible workspace sector is starting to impact the commercial real estate world as more providers and business models enter the market, according to a recent report. 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