Flexible Office Space Sector Poised for Significant Growth in the U.S.
Salt Lake City—September 19, 2019—Salt Lake City is the fastest-growing flexible office space market in the U.S., according to a new report from CBRE.
The market’s flexible-space inventory grew to 772,000 sq. ft. by the end of Q2 2019, an increase of 350,000 sq. ft., or 82.9 percent, from a year earlier. Flexible space now accounts for approximately 1.6 percent of Salt Lake’s total office inventory, up from 1.1 percent a year ago. Still, that ratio comes in slightly below the U.S. average of 1.8 percent, indicating that there is still some room for the sector to grow in the Salt Lake area. For purposes of this report, “Salt Lake City” includes Salt Lake and Utah counties.
“A year-over-year inventory increase of nearly 83 percent is substantial, even with the understanding that flexible office space is a growing market segment that is just beginning to gain real traction in our Salt Lake,” noted Lloyd Allen, Managing Director and Principal Broker of CBRE’s Salt Lake City office. “This report makes it clear that in the greater Salt Lake market, the tech and startup industries are closely tied to the flexible office space growth. This type of office space allows companies the greatest amount of agility as they grow and adjust their business strategies.”
“The report also shows that the greatest concentration of flexible office space is in the Utah County North submarket near Lehi and the point of the mountain—an area that continues to experience elevated levels of development,” he said.
The Utah County North submarket accounts for 34.5 percent of the total market’s flexible space inventory and represents the highest concentration of any submarket in the greater Salt Lake area.
CBRE outlines several growth scenarios for the flexible office space sector, which currently occupies a cumulative 71 million sq. ft., or 1.8 percent of the office space in 40 U.S. markets. CBRE’s baseline forecast calls for flexible office space to expand to approximately 13 percent of office space by 2030, reaching up to 600 million sq. ft. Even in a low-growth scenario, CBRE sees flexible office space claiming up to 6.5 percent of the market by 2030.
Fueling that growth is demand from small businesses and enterprise users alike that favor the flexibility of office accommodations on relatively short-term leases, allowing them to expand or contract their space according to the needs of their business. Additionally, the flexible office space category has room to grow in every U.S. market. Even markets where flexible office space is well established – such as San Francisco at 4 percent of its office market and Manhattan at 3.6 percent – aren’t as penetrated as major international markets like London and Shanghai, both at 6 percent.
“We’re seeing a fundamental change in the expectations that organizations and their employees have for the workplace. This change is spurring an increasing number of companies to engage with flexible office solutions that provide the physical environment and business terms they prefer. This shift is ongoing,” said Julie Whelan, CBRE’s Americas Head of Occupier Research. “There are some very bold predictions in the marketplace – with some calling for flexible space accounting for as much as 30 percent of office space in the future. There is simply not enough available office space to support this supply without even more drastic changes in tenant behavior.”
CBRE believes flexible space can account for as much as 22 percent of office space by 2030 under the most aggressive flex-space adoption scenario.
CBRE’s analysis found the majority of flexible-space supply in the U.S. concentrated in top markets, many of them tech hubs. Several of those markets also registered the fastest growth rates in the past year.
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 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 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 www.cbre.com.