Boston – Boston is the fourth-largest flexible office market by square footage in the U.S., according to a new report from CBRE. The market’s 3.7 million-sq.-ft. flexible-space inventory is behind only Manhattan (15 million sq. ft.), Los Angeles (5.4 million sq. ft.), and Chicago (3.8 million sq. ft.).
Flexible space accounts for 1.7 percent of Boston’s total office inventory, up from 1.3 million sq. ft. a year ago. That ratio comes in just below the U.S. average of 1.8 percent, indicating that there is room for the sector to grow in Boston.
“Boston is among the largest and fastest growing flexible office space markets, yet not as penetrated as other primary markets in the United States,” said Jodie Poirier, Managing Director, New England, CBRE. “There is runway ahead for this niche offering that will benefit from the vibrant technology and life science industries that underpin our market.”
With the CBD accounting for more than 35% of greater Boston’s flexible space, CBRE expects to see flexible space operators expand in Boston’s smaller submarkets and potentially in the suburban submarkets.
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.