Salt Lake City—January 24, 2019—A CBRE analysis of recent national building sales that include flexible office space found that nearly 40 percent of these transactions achieved values greater than the average for office buildings in their market.

The CBRE study also found that another 52 percent of those deals were sold at values roughly equivalent to their respective market average. The analysis included 31 transactions within the past five years of buildings with at least 10 percent of their square footage dedicated to flexible space.

“Our analysis found that in some cases the presence of flexible-space tenants – and the building improvements they initiate – may benefit overall property values, causing some lower-classified buildings with flexible space to perform as if they were Class A assets,” said Julie Whelan, Americas head of occupier research, CBRE. “By investing in build-outs and progressive real estate structures, such as partnerships with flexible space providers, landlords can differentiate their properties and, under the right circumstances, boost their value beyond that of their peers.”

CBRE’s analysis included comparing sales of buildings with flexible space to sales of similar, same-market buildings without flexible space.

The CBRE study found that most buildings with modest portions of their square footage dedicated to flexible space registered no detrimental impact to their cap rates—a measure of a building’s value relative to its cash flow. In transactions of office properties with flexible space comprising less than 40 percent of the building, 67 percent produced capitalization rates on par with non-flex peer transactions.

Conversely, in transactions where flexible space comprised more than 40 percent of the building, 64 percent produced cap rates less favorable than in peer transactions. The divergence is likely due to the perceived risk associated with higher concentrations of flex space, as well as the fact that buildings with high flexible space concentrations are much more likely to be Class B buildings.

While the CBRE analysis reveals several interesting patterns, the sample set is limited to a small pool of building with flex space that have been sold. As flexible workspaces become more widespread and more buildings with this space are sold, a clearer valuation picture will emerge.

“Despite our expectation that the flexible space segment will continue to mature and expand in the coming years, real estate fundamentals will remain the most important consideration for investment, regardless of the presence of flexible space,” Ms. Whelan said.


About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2017 revenue). The company has more than 80,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at