US Flexible Workspace Review 2016
The flexible office market is dynamic and fast growing.
The rise of the contingent workforce and take up of flexible workspace by corporate occupiers has driven growth in the US flexible office market in 2015/6. Co-working has grown more than 10% across the US and combination centres offering both executive suites and co-working spaces have expanded by 12.9% in the last year alone.
The increase in centres offering some form of co-working is four times that of conventional executive suites, which have increased by only 3.4% in the same time period. The total flexible workspace market has grown by an average 4.3% and now includes 3,596 centres, the largest markets of its kind in the world with the UK following behind at 3,290 centres.
The US market is still relatively concentrated with 50 per cent of the total market located in five states and the same proportion of centres in just 50 cities. California leads the way as the state with the most flexible space but also the largest number of dedicated co-working spaces, driven by widespread adoption of co-working by the TAMI (Technology, advertising media and information technology) firms of San Francisco and Palo Alto. There are now 103 “pure” co-working spaces in the Sunshine State, more than double that of any other state in the US as the trend for collaborative workspace continues its inexorable spread from its Silicon Valley roots to the rest of the global market.
Desk rates decreased in NYC in the past year by 2.9% but it is still the most expensive city in the US for flexible workspace at $1,047 per desk per month. Washington DC is in close second to NYC with an average workstation rate of $1,022, an increase of 17.2% on the previous year. San Francisco has also experienced double digit growth in workstation rates of 11.5%, which take it third place in the list of most expensive locations, some $100 more expensive than Los Angeles in fourth place.
The greatest proportional growth in flexible workspace per city has come outside the top ten largest cities, in secondary locations such as San Jose, Portland and San Antonio. These markets have seen market growth of up to 15% as the number of flexible office options grow across the US.
However, the most telling statistic relate to two of the US’ more mature markets – San Francisco and Washington DC – where despite increases in the supply of space by 6.3% and 7.3% respectively, workstation rates have grown rapidly. Rate increases of 11.5% in San Francisco and 17.2% in Washington DC would suggest that the market has enough occupier demand for space to support relatively large increases in supply and still introduce aggressive rate hikes in the market. This would mark them both as areas for growth in the coming year.