Key Stats from Instant Offices 2018 U.S. Workspace Market Report
If you haven’t had a chance to read the latest U.S. flexible workspace market review from our friends at Instant Offices, don’t fret. We’ve highlighted the key stats on today’s workspace market that you should know and our interpretation of the data.
Read on for more stats and what the numbers mean for the market. Share the knowledge by tweeting your favorite market stat.
There are 80 million square feet of flexible space in the US, compared to 50-60 million square feet in the UK, the world’s second largest market.Click To Tweet
The US leads the flexible workspace market by square footage speaks to a growing interest in the coworking and flexible workspace concepts. While big named brands in the UK are numerous, US-based operator uptake in space has been significant. Players such as Industrious, Serendipity Labs and We Work are front and center of this consumption, often opening more than one center in the same market. We believe it speaks to the confidence in the coworking business model, increased risk-taking and investment by large stakeholders and CREs, and the ever-growing adoption of modern working trends.New York, California, and Texas are growing faster than anywhere in the US at an average increase 12% compared to 4% elsewhere in the country.Click To Tweet
New York City continues to be the business center of the US and uptake in flexible office space speaks to its continued success as a prime choice for doing business. The sky-rocketing expense of urban hubs such as San Francisco are not only driving SMBs and corporates to rethink their corporate real estate strategies, but it’s also driving the latest co-living/co-working concepts to take root.Average size by flexible workspace category: serviced offices @ 19,000 sq ft, hybrid offices (coworking and private offices) @ 22,000 sq ft, coworking spaces @ 10,000 sq ft.Click To Tweet
The grassroots coworking model was stigmatized early on for its lack of profitability. It wasn’t until this year that the statistics spoke to a new generation the coworking model. Deskmag Coworking Survey this year pointed to a slight increase in Coworking spaces and an overall increase in private offices. This explains the difference in average sizing by category of flexible workspaces. Pure open space coworking concepts are more likely to take less space at both a lower cost and risk and focus on community, whereas serviced offices and hybrid spaces, attempting to cater to both independent workers and SMBs or corporates, are opting for larger spaces.There are 4,721 centers in the U.S. and more than half are run by independent operatorsClick To Tweet
The likes of We Work, Spaces and Regus account for millions of square feet and countless centers throughout the US flexible workspace market. The impressive 51% run by independent operators are a reflection of greater demand in local markets and increased investment in what Instant calls “Indie” workspace concepts. Just last year, shared workspace brands such as Industrious and Bond Collective secured funding to expand their network of workspaces, as well as Knotel, provider of flexible headquarters-as-a-service. These brands are matching the competition posed by the “giants” of the industry. More importantly, independent operators are filling gaps in the market and specific worker demands by catering to local and niche communities.93% of operators in the US are independent operatorsClick To Tweet
Of the 2,138 total operators noted by Instant, 93% of them are not the likes of We Work, Regus, Spaces or Servcorp. This demonstrates confidence among independent operators, investors and CRE players in the flexible workspace and coworking office sectors. It’s likely this number may decrease with an influx of big-named oversea brands looking to expand to cities like New York and San Francisco, such as Mindspace and No18, a luxury workspace concept by IWG.There are 4,721 centers run by 2138 operatorsClick To Tweet
Compared to the 3,596 centers noted by Instant Offices in the 2016 US flexible workspace report. US operators added 1125 centers since 2016, a 23% increase. The growth in centers demonstrates a continued drive to meet demand in the market thanks to a more widespread acceptance of flexible working options among CRE players as well as SMBs and startups opting for flex space.
Ninety-three percent of the 2,138 operators run single-site operations in the US. These 2,106 single site operators are up from 2,002 the previous year, a 5% increase. Instant owes much of the market growth to the entrepreneur who has seen opportunity in the flexible workspace market and is capitalizing on local markets and niche sectors.Operators with 10+ centers represented 58% of new centers during 2017Click To Tweet
Naturally, operators with an established business model, years of profitability and market experience under their belts are at a competitive advantage to continue expanding. However, the 42% of new centers opened by small to medium-sized operators points to the opportunity in the market for operators of any size to contribute to the growth of the sector.The average desk rate across the US was $763 for the past 12 months, up from $747 the prior yearClick To Tweet
The creep up in price the average desk rate is consistent with the law of supply economics. The higher rate per workstation is consistent with the increased quantity of supply. The more flexible workspace available on the market due to increased demand, the higher the price point operators can charge, and therefore, increasing revenues. Thanks to the mainstream attention from both provider and consumer and wider-spread demand, the market can tolerate increased desk rates. When supply outpaces, demand operators may need to rethink upward slope pricing.Emerging markets in the US such as Missouri, Louisiana, and New Hampshire have seen considerable growth in desk rates of between 10-12%Click To Tweet
Secondary markets have become a golden opportunity for independent operators to deliver flexible workspace. On the whole, emerging markets such as Missouri and Louisiana are not attracting the giants like We Work and Spaces. Greater awareness from CRE organizations across the US is driving new, non-traditional lease agreements and management contracts with operators. The lower barrier to entry in these markets enables operators to open more spaces to supply for demand, while CRE asset holders can diversify their real estate portfolios with flexible space – it’s a win-win.
The growth in desk rates in these emerging markets also speaks to the normalization of the flexible workspace as the new office and the underlying movement away from traditional office leasing. An indication that commercial real estate, landlords, and developers should be adapting to the trend before the market upswing dies down.
Read here for more Takeaways from the Instant Report.
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