Denver Seventh-Largest Flexible Office Space Market in U.S.
Denver is the seventh-largest flexible office space market in the U.S., according to a new report from CBRE. The market’s flexible-space inventory grew to 2.8 million square feet by the end of Q2 2019, an increase of 750,000 square feet, or 37 percent, from a year earlier.
Flexible space now accounts for 2.4 percent of Denver’s total office inventory, up from 1.8 percent a year ago and well above the U.S. average of 1.8 percent. This positions Denver as the fifth-most penetrated flexible office market in the country, tied with Austin and Seattle.
“The growth of the flexible office space sector in Denver has been swift and significant, driven in large part by our flourishing tech scene. Whether it’s a startup just getting off the ground or a large corporation looking to test the Denver market for a new office, demand for the agility provided by flexible space is high. We also see landlords pursuing flex providers as tenants as a way to reposition a property and capture a vibrant workforce,” said Pete Schippits, senior managing director, CBRE.
Flexible office space is heavily concentrated in Denver’s downtown submarket, which accounts for 38.4 percent of the market’s flexible space inventory.
CBRE outlines several growth scenarios for the flexible office space sector, which currently occupies a cumulative 71 million sq. ft., or 1.8 percent of the office space in 40 U.S. markets. CBRE’s baseline forecast calls for flexible office space to expand to approximately 13 percent of office space by 2030, reaching up to 600 million square feet. Even in a low-growth scenario, CBRE sees flexible office space claiming up to 6.5 percent of the market by 2030.
Fueling that growth is demand from small businesses and enterprise users alike that favor 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. Additionally, 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 percent of its office market and Manhattan at 3.6 percent – aren’t as penetrated as major international markets like London and Shanghai, both at 6 percent.
“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,” said 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 percent 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 percent of office space by 2030 under the most aggressive flex-space adoption scenario. CBRE’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.