Orlando is the fifth-fastest-growing flexible office space market in the U.S. according to a new report from CBRE. The market’s flexible-space inventory grew to 485,000 sq. ft. by Q2 2019, up 180,000 sq. ft., or approximately 59 percent from a year earlier.
Flexible space now accounts for 1.2 percent of Orlando’s total office inventory, up from 0.7 percent a year ago. The ratio comes in below the U.S. average of 1.8 percent, indicating there is room for even further growth in this sector.
In the past year, two new-to-market flexible-space operators established operations in Orlando, adding nearly 100,000 sq. ft. to the total inventory. Today, there are 15 flexible-space operators spanning 27 locations, most of which are highly concentrated in Orlando’s Downtown/CBD submarket (56.5 percent).
“Flexible office space is a growing, viable solution for remote workers, entrepreneurs, and startups here in Orlando,” said Jim Gray, Managing Director at CBRE. “As Orlando’s tech sector continues to expand, demand for flexible office space is highly likely to grow as well.”
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 sq. ft. 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.