Chicago Ranks No. 3 in Flexible Office Space in US
The flexible office space market in the Windy City grew by 958,000-square feet between mid-year 2018 to the end of June 2019.
CHICAGO—The City of Chicago’s flexible office market is behind only Manhattan and Los Angeles as offering the largest inventory of space in the nation.
A report released recently by CBRE states that Chicago ranks third in flexible office space with an approximately 3.8-million-square-foot inventory at the mid-point of 2019. The flexible office space market in the Windy City grew by 958,000-square feet between mid-year 2018 to the end of June 2019.
CBRE states that Manhattan has the largest flexible office space market in the nation at 15 million square feet, followed by Los Angeles at 5.4 million square feet.
“Flex space has been a significant driver of leasing activity in Chicago, as it has become a popular strategy for both start-ups and corporate users across myriad industries,” says Jamie Georgas, senior managing director of CBRE’s Chicago office and leader of the Chicago Occupier Practice. “We see this trend continuing in the foreseeable future as both large-scale and niche flex providers are expanding at a rapid pace to meet this demand.”
Flexible space can be found across the majority of Chicago’s downtown submarkets, however the West Loop accounts for the largest portion with 20.9% of the city’s flex space inventory.
The flexible office market in the US occupies a cumulative 71 million square feet or 1.8% of the office space in 40 U.S. markets. CBRE’s baseline forecast calls for flexible office space to expand to approximately 13% of office space by 2030, reaching up to 600 million square feet. Even in a slow-growth scenario, CBRE sees flexible office space claiming up to 6.5% of the market by 2030.
Small business and enterprise users will be fueling that projected growth, favoring 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, according to the report.
CBRE also states in the report that 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% of its office market and Manhattan at 3.6%—aren’t as penetrated as major international markets like London and Shanghai, both at 6%.
“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,” says 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% 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% of office space by 2030 under the most aggressive flex-space adoption scenario. The brokerage firm’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.