One of the fastest growing trends in the commercial office sector is the rapid growth of coworking and third-party flexible space solutions. For years the commercial office market has functioned on a foundation of traditional, long-term leases as its primary mode of operation for business, but in recent years this has begun to shift to allow for more flexibility for property users. According to a new report by CBRE (1), flexible space solutions are "coworking, accelerators, serviced offices, enterprise solutions and turnkey environments that solve for requirements that are uncertain, transient or short-term in nature." The rise in these types of spaces provides occupiers with a variety of options for leasing office space that weren't as readily available in the past.
Though there have always been short-term office space providers, the growth of this model is rapid and ever-evolving. What started as a service for small tenants is quickly pivoting to account for larger companies, including many in the Fortune 500 who are exploring ways to leverage flexible space solutions as a piece of their larger portfolio strategy. In fact, companies of all sizes are looking to build greater flexibility into their real estate portfolios, adding to the momentum for this trend to continue expanding.
The flexible space sector is affecting all types of property users:
* Small Users: As one example, leasing among tenants under 5,000 sq. ft. in Manhattan has fallen off dramatically dropping 41% from 2013 to 2017. This suggests that these small users are migrating to flexible space options.
* Large Users: 75% of corporate occupiers anticipate including coworking or flexible space in their occupancy portfolio over the next three years, according to CBRE's 2018 Global Occupier Survey.
* Landlords and Investors: According to CBRE's 2018 Global Investor Intentions Survey, approximately 45% of landlords and investors say that flexibility of use is the most important occupier trend for real estate in 2018.
* Brokers: Real estate advisors are responding to tenant needs for quick, turn-key space by showing them flexible space options alongside more traditional lease arrangements. Many flexible space providers are also courting brokers to "find and fill" their spaces by paying commissions. In addition, brokers are also offering comparisons on quality of the flexible space service and viability of the provider as they advise their clients on the best real estate strategy...