- JLL runs down the top 15 flexible workspace markets in the US that are poised for growth.
- Their findings reveal that the US coworking industry has grown at an average of 23% for the past 8 years.
- While New York once again claims the top spot, there are numerous up-and-coming cities vying for the coworking crown.
We already know coworking is the new normal. We also know coworking has revolutionized the CRE industry.
Suggested Reading: Top 5 Ways CRE is Crossing into the Coworking Industry
The flexible workspace industry in the US has grown at an average of 23% for the past 8 years. According to JLL, in 2018 alone flexible space made up nearly two-thirds of office market occupancy gains in the US. In fact, the New York City office market was dominated by coworking last year; in the first eight months of 2018, flexible space leased a total of 1.9 million square feet. In August alone, coworking made up nearly one-third of Manhattan’s office leases.
Though this fast-paced growth isn’t sustainable in the long run, the flexible workspace industry will continue to grow. Currently, flexible workspaces account for less than 5% of US office stock; JLL estimates that by 2030 that number will reach approximately 30%.
In its recent report, “Markets that are flexing their muscles in 2019”, JLL presents the top 15 US markets with the greatest flexible workspace growth potential.
The Top 15 US Flexible Workspace Markets, According to JLL
Flexible workspaces currently account for 1.7% of Charlotte’s office stock. The industry is expected to grow in the city due to increased demand from enterprise clients. According to JLL, “Charlotte’s nascent fintech, as well as consistently growing financial and professional services sectors, may find flexible space the best near-term fit to handle what is currently an imbalanced market in terms of supply and demand.”
Similar to Charlotte, flexible workspaces in Atlanta currently account for almost 1.7% of office stock. Since 2017, Atlanta has greatly invested in various urban development projects in the downtown and suburban areas. Flexible workspaces are expected to grow in this Georgian city given that it is “well suited to many of Atlanta’s new economic drivers, namely tech, film production and digital content creation.”
Nashville, like coworking, has attracted a young crowd. The city is expected to add approximately 2.7 million square feet of new space; however since much of it has already been pre-leased, JLL expects flexible workspace operators in the area to offer swing and denser space options to the market.
“Dallas has and continues to receive large-scale inbound corporate migration, both in terms of headquarters and back-office campuses.” This has powered the demand for flexible workspace, as they are able to cater to the needs of these newly arrived companies and users.
11. Oakland-East Bay
As rents in San Francisco continue to grow, many people and companies have turned to Oakland, which has experienced 50.6% in rent growth over the past three years. JLL believes that “flexible space providers in Oakland can take advantage of the city’s location as the geographic center of the Bay Area along with lower asking rents than in San Francisco.”
10. Los Angeles (Westside)
The media and entertainment, digital content creation, and production industries are growing in Los Angeles’ Westside. According to JLL, these industries are attracting a variety of tenants, many of whom are turning to flexible workspace solutions.
There are various development projects underway in Denver; the city is transforming parking lots and former industrial areas into mix-use space in order to create secondary markets. This has attracted traditional corporate clients as well as companies seeking creative office space.
“Seattle’s population and economic growth have been among the fastest of any large US city this cycle.” A significant part of Seattle’s growth has been thanks to the tech industry, which was among the early adopters of flexible workspaces. Flexible workspace operators in Seattle will experience growth as more tech companies seek interim space solutions. Currently, flexible workspaces account for 2.6% of the city’s office stock.
7. Washington, DC
Flexible workspace demand in Washington DC has been powered by nonprofits and political advocacy groups. JLL believes flexible workspace demand will be driven in the future mainly by the city’s growing technology tenants, freelancers, and large companies. JLL has also found that flexible workspace operators in the city are particularly successful if they are located within mixed-use areas.
6. Northern VA
Northern Virginia’s flexible workspace stock is “exceptionally limited”. However, it is home to a tech scene that’s expected to grow given the headquarter expansion activity in National Landing and projected increases in federal procurement spending, according to JLL. These companies will be looking for short-term leases, and coworking spaces will help fill this gap.
Boston’s economy is being powered, in part, by tech and innovation. Companies in these industries value flexibility as it allows them to better manage their growth. Moreover, “with 2.7 million sq ft of coworking space, Boston ranks the lowest among US gateway cities in terms of percentage of inventory that’s allocated to flexible use, which suggests a strong runway ahead.”
“Austin has made headlines throughout the current cycle as one of the stand-out office markets nationally, with new construction totaling more than 10% of supply.” According to JLL, Austin has attracted a young population, many of whom turn to coworking spaces as their first workplace choice.
3. Silicon Valley
Given that Silicon Valley is home to various tech companies that are venture-funded, it’s a great place for flexible workspaces as these companies are interested in limiting their lease liabilities on their balance sheets. Moreover, “the high cost of direct leases will likely provide another motivation for small and mid-size tenants to achieve greater density and improved utilization through flexible space.”
2. San Francisco
“The volatility and rapid pace of activity in the tech sector, combined with exceedingly limited options for tenants, provides an ideal environment for coworking and incubator-style flexible space offerings.” The city currently offers 2.7 million sq ft of office space, which means there is ample space for flexible workspace growth in the area.
1. New York
Even though New York is already at the top of the list, JLL believes “New York is poised from both a supply and demand perspective to see a major influx of flexible space.” Furthermore, New York is home to some of the world’s largest landlords, many of whom are interested in entering the flexible workspace market through management and partnership agreements, which will help further power the growth of flexible workspaces.