JLL: Flexible Space Market Driving Office Occupancy
The coworking space shows signs of becoming consolidated even as the amount of flexible space continues to grow.
WASHINGTON, DC–The flexible space market is now the main driver of office occupancy growth across the region, responsible for 42% of gains since the beginning of 2014, according to a new JLL research note written by Carl Caputo.
In the District, coworking has driven the flexible space market, with four recent leases by coworking providers in the CBD and East End helping to backfill more than 250,000 square feet of former law firm-occupied space. Another six recent coworking leases have taken less than 270,000 square feet of space at new or renovated offices in the emerging markets of The Wharf, Ballpark, Market District, Eastern Market, Dupont-Logan-Shaw and H Street, Caputo writes.
In Northern Virginia, flexible space was historically driven by executive suites. From 2000 to 2013, executive suites accounted for 478,401 square feet or 79% of the total occupancy growth in flexible space. But since 2014, coworking has dominated the growth in flexible space, with 424,966 square feet of occupancy growth, or 61% of all flexible space.
In Suburban Maryland coworking leasing activity has increased significantly in the last 12 months with three global coworking providers committing to open their first coworking locations in the state. These tenants will help drive close to 68,000 square feet of occupancy gains and increase the Suburban Maryland coworking supply by almost 15%, Caputo writes. Top Providers Dominate
The coworking space shows signs of becoming consolidated even as the amount of flexible space continues to grow. In Northern Virginia, for example, the top three coworking providers have each comprised 16% of the gains. Beyond the top three, nine different coworking providers have taken space, with each representing less than 4% of the gains, according to the alert.
In general, the top six providers have increased their market share from 444,694 square feet in 2009 to 2.3 million square feet today, representing 64% of the market today. JLL concludes that:
With active requirements out in the market projected to shift that market share to 70% of the flexible market by the middle of 2019, the remaining 70+ regional providers could face challenges in this increasingly evolving environment.