Salt Lake City Leads Nation in Flex-Office Growth

Salt Lake City is leading the nation in flexible office space growth. The Silicon Slope—the name given to the booming tech sector in Salt Lake City—is attracting big name flexible office providers to set up shop in the market. According to a new report from CBRE, the Salt Lake City market added 350,000 square feet of flexible office space in the second quarter, a total market increase of 89.9%.

The preference for flexible office in Salt Lake City is a similar story to other markets. “The traditional office transaction is at least five years, and if you are doing a build-to-suit-type of development, it could be 10- to 15-years. For a lot of companies, that is a long time to lock into real estate,” Lloyd Allen, managing director at CBRE, tells GlobeSt.com. “If it is your third largest cost behind compensation for your employees and product development, locking in for that long is a challenge. Particularly with technology start-ups and all kinds of start-ups, the idea of a flexible, shared office space is getting a lot of attention. Some providers are doing enterprise models, where companies can move into a longer-term space when they move to the next level.”

According to the report, Salt Lake City had the most growth of flexible office supply in the second quarter, followed by Seattle and Sacramento, both of which added approximately 65% of new space. However, these markets are both significantly larger and more established tech markets than Salt Lake City, saying a lot about its growth. “I was surprised but also very aware of the growth that we are experiencing and where that could lead,” Allen says about the result of the report. “New York, L.A. and Chicago certainly have a lot more square footage, but to see the percentage of growth in Salt Lake put us so high on the list was exciting. Seeing that in our market will certainly catch the attention of tech companies that aren’t looking to lock in long-term real estate requirements. Salt Lake is now a good option for those users.”

Even better news, the addition of flexible office space doesn’t seem to be exceeding market demand. According to Allen, the flex market presence is trending below the national average. “Even with the significant openings that we have seen in the last year, the flexible space market is still 1.5% of the overall market,” he says. “The average nationally is 1.8%. I was pleased to see that we are still a step or two below the national average. To see the growth that we are having and are still below the national average gave me confidence that our market is balanced in a good way.”

Looking ahead, Allen sees a bright future for the Salt Lake City tech market; however, he expects stability rather than rapid growth. “I would expect a period of stability after the tremendous growth that we have seen,” he explains. “I think if we did the same report next year, you wouldn’t see the same growth. It wouldn’t surprise me to see a breadth for a 6 to 12 month period.”