Nicole LaRusso, director of research & analysis at CBRE

NEW YORK CITY- Manhattan ranked first nationwide in flexible office growth by square footage over the past 12 months and has no plans of slowing down despite market chit chatter of a looming recession, according to a recent CBRE report on the sector.

"One thing is important, our view is that tenant demand for flexibility is here to stay among users of all sizes, large and small," Nicole LaRusso, director of research & analysis at CBRE, tells GlobeSt.com.

Flex office is a growing option for a spectrum of tenants ranging in shape and size. Solo entrepreneurs and small companies are no longer the sole focus, which flex-office companies like WeWork, the largest flexible operator of transactions in the last year, have secured as end-users. Medium and large corporate companies, dubbed "enterprise users," have emerged as top prospects lured to the reinvention of co-working.

More and more, large corporate firms are becoming drawn to flexible offices. A Big Apple-base that could double as a headquarters for operations or to house a fraction of the company's headcount has made it a popular option, says LaRusso.

Enterprise use of the flexible office space model was a key driver to 2019 leasing growth. Flex office square footage has tripled since 2014, amassing 15 million square feet as of Q1 2019 and growing 9.5% since year-end 2018, according to data from CBRE.

Manhattan alone amassed 15 million square feet as of H1 2019, which is a gang bust for a market that has seen strong growth over the past several years, which is expected to continue. Flex providers could account for approximately 15% of overall Manhattan leasing activity through year-end.

Leasing especially took off in 2018. That year, operators' leasing activity increased by a staggering 263% from 2017, accounting for over 4.8 million square feet. And as of Q2 2019, flexible space operators have leased over 1.8 million square feet.

After nine years of economic recovery, in the case of a recession, several push-and-pull factors could both challenge and upset the flex-space market. Sure, company lay-offs and peeled back growth prospects will impact real estate decision making, but on the flip-side could spur firms to get scrappy to stay afloat and reinforce cash flow.

Large providers could renegotiate leases, partner with landlords to reduce costs and share upside potential. Or a downturn could set off widespread industry consolidation, where the existent 100 plus flex office startups merge to consolidate demand in solid locations and close under-performers. Whereas, some end-users could double down on their portfolio, back-filling underutilized space. The possibilities are endless, says LaRusso.

"Flexibility is solid and growing, and how the market offers that space will continue to evolve," she said.

Instant Insights /

Manhattan Flex Providers Bulk-Up Office Despite Recession Warnings

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