A rooftop lounge overlooks Oakland's Lake Merritt at The Port Workspaces.
SAN FRANCISCO—Northern California is a good place to be for tenants with real estate strategies that call for a wide variety of office space options, says JLL in an exclusive. Three of the region's primary office markets–San Francisco, Silicon Valley and Oakland/East Bay–feature prominently in new JLL research into the flexible space phenomenon.
The report is quick to point out that flexible space is much more than just co-working. It also includes shared space, event space, sublease and other short-term lease options.
Flexible office space throughout the country has grown at an average rate of 23% since 2010. Roughly 5% of all office space today is flexible. JLL estimates by 2030 that figure will grow to be almost a third of the office market.
With almost 3 million square feet of flexible space, San Francisco is currently the sixth largest flexible office space market in the country but it's the growth potential that is particularly intriguing. New York, a far larger commercial office market, has roughly five times more flexible space, says JLL.
“The volatility and rapid pace of activity in the city's tech sector, strong population growth and the extremely limited options for tenants in the current market creates the perfect environment for the continued growth of flexible space solutions,” Steven A. Anderson, managing director, JLL, tells GlobeSt.com.
Sustained population growth and a spillover of tenants from San Francisco boosted Oakland's visibility in the 15 most active flexible office space markets. Despite the city's 50.6% increase in office rents during the past three years, tenants can still tap into lower occupancy costs in the Oakland market compared to San Francisco. Flexible space providers can also take advantage of the city's location as the geographic center of the Bay Area as well as its strong public transit links.
Jason Volpe, executive vice president with JLL, says it's important to remember that flexible office space is not a real estate strategy in and of itself, but part of an overall strategy.
“Co-working and other short-term space solutions can help tenants test new markets for growth as well as provide flexibility when making expansion decisions in established locations,” Volpe tells GlobeSt.com.
The high cost of direct leases in markets such as San Francisco, Oakland and Silicon Valley also provides a motivation for small and mid-size tenants to achieve greater density and improved utilization through the use of flexible space.
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
