Manhattan's Flexible Office Sector Has Grown 600 Percent Since 2009
According to a new CBRE report, coworking companies and other third-party flexible space operators now occupy 9.2 million sq. ft. in the Manhattan office market.
The sector, which includes 65 different flexible space companies that operate more than 260 locations, has grown by approximately 600 percent since 2009. While the sector currently accounts for just 2.5 percent of overall Manhattan office occupancy, its footprint is expanding at an accelerating pace, with over 900,000 sq. ft. of additional leases signed in the first quarter of 2018 and many more in the pipeline.
While traditional long-term leases are the preferred model for business and the foundation of the commercial office market, the rapid growth of third-party flexible space operators provides occupiers with a wide variety of options for leasing office space. Since 2013, when the expansion of third-party flexible space began to gain significant traction, the sector has averaged an annual growth rate of 22 percent.
"Coworking was propelled to the forefront of the office market in 2010, on the heels of the financial crisis," said Nicole LaRusso, Director of Research & Analysis for CBRE. "What started as a service for freelancers, start-ups and small businesses has quickly pivoted to appeal to larger users. Now a host of companies are operating in the market, with several pursuing ambitious expansion plans across Manhattan and beyond. If the recent pace of leasing continues, we could see these third-party flexible space providers grow their footprint to 15 million sq. ft. by the end of 2020."
There are strong indicators of user demand for the services of the third-party space providers. In fact, 75 percent of corporate occupiers anticipate including coworking or flexible space in their occupancy portfolio over the next three years. Smaller users also continue to be an important part of the target market; as the flexible space footprint has grown in Manhattan, the amount of traditional leasing among tenants under 5,000 sq. ft. has dropped off by 42 percent between 2013 and year-end 2017, suggesting that these users are migrating to flexible space solutions.