Flex Office Users Are Taking Less Space For a Shorter Term
The average flex workspace requirement size was down by 29% last year and dropped average initial term length by a month.
Office occupiers demanded agility in office space selection last year, according to a new report—a trend that drove the average flex workspace requirement size down by 29% and dropped average initial term length by a month.
New research from The Instant Group shows that Phoenix led US cities for increases in workstation rates last year, with an increase of 39%, followed by Nashville (14%); Denver (11%), and Austin (3%).
On the flip side, cities with the largest drops in cost-per-desk were NYC Midtown (-29%), Washington, DC (-23%), Boston (-22%), and Los Angeles (-18%). Demand also rose 22% in Denver and 20% in Austin, while it dropped by 9% in San Francisco and by 8% in Chicago. And while demand dropped by 14% in New York City, it rose significantly in the surrounding suburbs: demand went up by 200% in Harrison, NY, by 250% in New Rochelle, NY, and by 60% in Greenwich, Conn.
In some cities, like Boston, the traditional office market actually continued to rise during the pandemic while the demand for flex or agile space decreased. In Boston, traditional office costs increased by 6% year-over-year in 2020, according to JLL data, while flexible workstation rates decreased by 22%.
Flex space providers were also forced to rethink growth strategies last year, with both large and small providers readjusting in response to the pandemic. IWG remained a dominant force, according to Instant Group analysts, with 15% of the market, while WeWork’s market share reduced as its footprint decreased, with the onetime giant commanding 4.5% of market share by the first quarter of this year. Overall, small providers still make up more than three-quarters of the market.
“The pandemic made agile workspace a requirement for major landlords and corporations alike moving forward, and we saw that play out almost immediately in the numbers,” said Joe Brady, CEO Americas, The Instant Group. “In secondary cities and suburban markets where people flocked to hunker down during Covid-19, we saw parallel demand for agility as companies and operators rushed to adjust. We expect this, together with landlords becoming involved in the industry by partnering with providers or going it alone, to drive the industry’s next growth phase. Today, flexible work in the US encompasses more than 159 million square feet. By 2025, we think that will be 300 million square feet.”