WeWork New York City HQ/ Photo credit: The We Company
NEW YORK CITY— With WeWork planning a September IPO, agile space is an everyday aspect of the real estate industry. CBRE's report authored by Richard Barkham, Spencer Levy, Julie Whelan, Travis Dees and Brandon Forde highlights this rapidly growing market that still only accounts for 2% of the total national office supply.
The report points out these key developments in flex-space activity:
Last year, across the US, flexible space accounted for 13.4 million square feet or 7.6% of total office square footage leased. At the end of H1 2019, this sector has leased 7.1 million square feet in all markets tracked by CBRE.
Since 2018, 56 flexible office operators have leased space across the country. But the 10 most active providers accounted for the lion's share—more than 90% of the square footage: WeWork, Spaces, Knotel, Industrious, Convene, Regus, Serendipity Labs, Bond Collective, CommonGrounds and Jay Suites.
CBRE underscores that flexible space is only 2% of the office supply across the country. Thus, the sector still has room for growth. But competition for renting out flex-space is heating up, within the business and now with more traditional tenants and developers and building owners like Tishman Speyer entering the game.
As the competition of flexible leases in the major cities continues to squeeze players, CBRE has recorded growth in smaller markets on the upswing: Phoenix, Austin and Nashville. The brokerage firm and advisor notes following Amazon's selection of its HQ2, Northern Virginia has increased its leasing activity.
As to future trends, CBRE predicts agile office space providers will face challenges not from tenant demands but from limited available office product in markets with intense competition for space. The real estate advisor predicts growth with large occupiers replacing portions of their traditional office space with flexible leases.
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Betsy Kim
Betsy Kim was the bureau chief, East Coast, and New York City reporter for Real Estate Forum and GlobeSt.com. As a lawyer and journalist, Betsy has worked as the director of editorial and content for LexisNexis Lawyers.com, a TV/multi-media journalist for NBC and CBS affiliated TV stations in the Midwest, and an associate producer at Court TV.
