The traditional industries—the FIRE sectors—have gone through a period of shrinkage and consolidation that plateaued about a year ago, and they still represent a large portion of the jobs. In some markets like New York City, it's a majority. But they're not the growth engine. They're not the reason that new construction has taken off in New York for the first time since the mid 1980s. And while it's not all being leased by the tech sector, tech is still the engine of growth.

GlobeSt.com: The current story of another traditional office-using sector, the legal profession, is that it's consolidating its footprint as firms use space more efficiently. Is that story being oversold?

Cohen: A sizable minority of firms are taking less space pursuant to their new leases. So to call it a trend is accurate. It's not 50% or more, but it's enough that these statistics are meaningful. And what the legal industry is doing is adopting smaller, more uniform standards to drive down the measurement of square feet per attorney. That's the benchmark the industry uses to say, “How am I doing? How efficient am I?”

That being said, the legal industry is a laggard by other measures. Many industries migrated out of private offices a decade or more ago, putting people in open spaces. Law firms are still a “superstar” culture, where retention is aided and abetted by the ability to provide a private, windowed accommodation to your heavy hitters. So if you compare law firms to other industries, they are still much less densely populated users of space.

GlobeSt.com: Yet law firms are making a long-term change in their view of how they use office space, after maintaining a more traditional view for decades before this.

Cohen: There's no question. But I would say that across the board, every industry has been doing the same thing, with rare exceptions. The move to open officing, cubes, benching in some industries is common to all sectors as part of the drive toward reduced footprint and greater efficiency. It's the rising tide.

GlobeSt.com: The latest report notes that in Boston and some other markets, there has definitely been an increase in the amount of space that WeWork and similar tenants have been taking. Is that being driven in part by larger tenants rethinking their space requirements, in the sense that they can add the coworking space on an as-needed basis?

Cohen: I wouldn't characterize it as a rethinking. I would say that the coworking spaces are meeting a longstanding demand that was not being met. Think of it as an economic model: landlords and investors are making investments with horizons of three, five, 10 years or longer. Tenants have long been saying, “I can't see out more than a year or two as to what my needs will be, and Mister Landlord, you're forcing me to make my best guess. Every time I sign a five- or 10-year lease, the odds are I'm going to get it wrong.”

When tenants went to their landlords for flexibility in lease terms, the kinds of flexibility that the investment and development community was offering fell woefully short of what tenants needed. Into the breach stepped the coworking firms, and to a large extent I think it was inadvertent. They were targeting the Millennials and entrepreneurs—people who were looking for a collegial atmosphere to meet with colleagues and experience a community. The coworking providers nailed that out of the box. But the unintentional success was in discovering that there were enterprises out there that were willing to pay a large premium to a) avoid that capital cost and b) more importantly, achieve the flexibility that they had craved all these years and which no one was able to provide.

The economic model of property investing required the landlords to seek commitments of medium to long terms. The businesses were looking for more flexible solutions that could deal with the volatility in their industries. Along comes the coworking provider that says, “I can bridge that gap.”

NEW YORK CITY—The third quarter saw the US office sector continue its run of strong performance, with rents either holding steady or rising in the sector's 10 leading markets, according to Colliers International's latest report. Yet while the traditional industries contributed to that success story, the real trendsetters lately have been comparative newcomers.

In early October, Dropbox signed the largest office lease San Francisco has ever seen: 736,000 square feet, representing the entirety of Kilroy Realty's Exchange on 16th development. And Colliers notes that creative office space providers, including WeWork, are increasing their presence in several markets, notably Boston. To get a handle on the brave new world of office leasing, GlobeSt.com spoke recently with Michael Cohen, president of the New York tri-state region at Colliers. An edited version of that conversation appears below.

GlobeSt.com: The third quarter was marked by major leasing deals in many markets from tech firms as well as coworking firms. And we also saw a push in a number of markets to attract Amazon for its HQ2. Can we chalk all of this up as simply more evidence of how important tech has become to the office sector?

Michael Cohen: I don't think it's possible to overestimate the impact that the tech sector has had on many CBDs. It's not equally important in, say, Nashville as it is in Boston, New York or San Francisco; the impact differs depending on where you are. But for many cities, tech has been the job growth engine of the past five years.

The traditional industries—the FIRE sectors—have gone through a period of shrinkage and consolidation that plateaued about a year ago, and they still represent a large portion of the jobs. In some markets like New York City, it's a majority. But they're not the growth engine. They're not the reason that new construction has taken off in New York for the first time since the mid 1980s. And while it's not all being leased by the tech sector, tech is still the engine of growth.

GlobeSt.com: The current story of another traditional office-using sector, the legal profession, is that it's consolidating its footprint as firms use space more efficiently. Is that story being oversold?

Cohen: A sizable minority of firms are taking less space pursuant to their new leases. So to call it a trend is accurate. It's not 50% or more, but it's enough that these statistics are meaningful. And what the legal industry is doing is adopting smaller, more uniform standards to drive down the measurement of square feet per attorney. That's the benchmark the industry uses to say, “How am I doing? How efficient am I?”

That being said, the legal industry is a laggard by other measures. Many industries migrated out of private offices a decade or more ago, putting people in open spaces. Law firms are still a “superstar” culture, where retention is aided and abetted by the ability to provide a private, windowed accommodation to your heavy hitters. So if you compare law firms to other industries, they are still much less densely populated users of space.

GlobeSt.com: Yet law firms are making a long-term change in their view of how they use office space, after maintaining a more traditional view for decades before this.

Cohen: There's no question. But I would say that across the board, every industry has been doing the same thing, with rare exceptions. The move to open officing, cubes, benching in some industries is common to all sectors as part of the drive toward reduced footprint and greater efficiency. It's the rising tide.

GlobeSt.com: The latest report notes that in Boston and some other markets, there has definitely been an increase in the amount of space that WeWork and similar tenants have been taking. Is that being driven in part by larger tenants rethinking their space requirements, in the sense that they can add the coworking space on an as-needed basis?

Cohen: I wouldn't characterize it as a rethinking. I would say that the coworking spaces are meeting a longstanding demand that was not being met. Think of it as an economic model: landlords and investors are making investments with horizons of three, five, 10 years or longer. Tenants have long been saying, “I can't see out more than a year or two as to what my needs will be, and Mister Landlord, you're forcing me to make my best guess. Every time I sign a five- or 10-year lease, the odds are I'm going to get it wrong.”

When tenants went to their landlords for flexibility in lease terms, the kinds of flexibility that the investment and development community was offering fell woefully short of what tenants needed. Into the breach stepped the coworking firms, and to a large extent I think it was inadvertent. They were targeting the Millennials and entrepreneurs—people who were looking for a collegial atmosphere to meet with colleagues and experience a community. The coworking providers nailed that out of the box. But the unintentional success was in discovering that there were enterprises out there that were willing to pay a large premium to a) avoid that capital cost and b) more importantly, achieve the flexibility that they had craved all these years and which no one was able to provide.

The economic model of property investing required the landlords to seek commitments of medium to long terms. The businesses were looking for more flexible solutions that could deal with the volatility in their industries. Along comes the coworking provider that says, “I can bridge that gap.”