Key Takeaways
- • Flexible office space accounted for 8.5% of total U.S. leasing activity in H1 2019, up from 7.6% in 2018, despite representing only 2% of total national office supply, indicating substantial room for market expansion.
- • WeWork, Spaces, Knotel, Industrious, Convene, Regus, Serendipity Labs, Bond Collective, CommonGrounds, and Jay Suites collectively control over 90% of flexible space square footage leased since 2018, with 56 total operators competing in the market.
- • H1 2019 saw 7.1 million square feet of flexible space leased across tracked markets, compared to 13.4 million square feet for the full year 2018, reflecting continued sector momentum ahead of WeWork's planned September IPO.
- • Competition is intensifying in major metropolitan markets, prompting growth migration to secondary markets including Phoenix, Austin, Nashville, and Northern Virginia, with the latter benefiting from Amazon's HQ2 selection announcement.
- • CBRE projects the primary growth constraint will shift from tenant demand to limited available office inventory in high-competition markets, with large occupiers increasingly replacing portions of traditional office leases with flexible arrangements.
Summary
The flexible office space sector has emerged as a material force in U.S. commercial real estate, capturing 8.5% of nationwide leasing activity in the first half of 2019 according to CBRE research authored by Richard Barkham, Spencer Levy, Julie Whelan, Travis Dees, and Brandon Forde. This represents acceleration from 2018's 7.6% share, signaling institutional acceptance of agile workspace arrangements beyond their earlier positioning as co-working offices. Despite this growth trajectory, flexible space still comprises only 2% of total national office supply, establishing a structural growth runway for the sector.
Market concentration remains pronounced among established operators. Since 2018, 56 flexible office providers have expanded across the United States, but the top 10 operators—WeWork, Spaces, Knotel, Industrious, Convene, Regus, Serendipity Labs, Bond Collective, CommonGrounds, and Jay Suites—account for more than 90% of leased square footage in the sector. This concentration reflects both first-mover advantages and operational scale required to compete in flexible space. WeWork's planned September IPO signals investor appetite for the model's growth potential and underscores the sector's mainstream acceptance within institutional real estate markets.
Geographic dynamics are shifting as competition intensifies in major markets. Secondary markets including Phoenix, Austin, and Nashville are attracting increased flexible space activity, while Northern Virginia has seen elevated leasing following Amazon's HQ2 selection announcement. This geographic dispersion suggests that traditional supply constraints in primary markets are beginning to channel operator expansion into emerging growth regions. Notably, traditional real estate developers and building owners, including Tishman Speyer, are now entering the flexible space market directly, expanding competitive pressures beyond specialized operators.
CBRE's outlook identifies a meaningful structural shift in growth constraints. Rather than facing demand limitations, flexible space operators will encounter challenges from restricted available office inventory in high-competition markets. The advisory firm anticipates sustained expansion driven by large corporate occupiers progressively replacing portions of conventional office leases with flexible arrangements, suggesting flexible space is transitioning from niche offering to standard real estate portfolio component for institutional and Fortune 500 tenants.
Market concentration remains pronounced among established operators. Since 2018, 56 flexible office providers have expanded across the United States, but the top 10 operators—WeWork, Spaces, Knotel, Industrious, Convene, Regus, Serendipity Labs, Bond Collective, CommonGrounds, and Jay Suites—account for more than 90% of leased square footage in the sector. This concentration reflects both first-mover advantages and operational scale required to compete in flexible space. WeWork's planned September IPO signals investor appetite for the model's growth potential and underscores the sector's mainstream acceptance within institutional real estate markets.
Geographic dynamics are shifting as competition intensifies in major markets. Secondary markets including Phoenix, Austin, and Nashville are attracting increased flexible space activity, while Northern Virginia has seen elevated leasing following Amazon's HQ2 selection announcement. This geographic dispersion suggests that traditional supply constraints in primary markets are beginning to channel operator expansion into emerging growth regions. Notably, traditional real estate developers and building owners, including Tishman Speyer, are now entering the flexible space market directly, expanding competitive pressures beyond specialized operators.
CBRE's outlook identifies a meaningful structural shift in growth constraints. Rather than facing demand limitations, flexible space operators will encounter challenges from restricted available office inventory in high-competition markets. The advisory firm anticipates sustained expansion driven by large corporate occupiers progressively replacing portions of conventional office leases with flexible arrangements, suggesting flexible space is transitioning from niche offering to standard real estate portfolio component for institutional and Fortune 500 tenants.
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