Flexible workspace is not just for millennial freelancers or tech startups anymore. Large, multinational companies are rapidly adding flexible workspaces to their global portfolios. This report examines the global trends taking place within the flexible office sector and the implications for the Great Lakes region.
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JLL Flexible Office Space Report
1. 1 | Flexible Office Space 2018
Flexible workspace is not just for millennial freelancers or tech startups anymore.
Large, multinational companies are rapidly adding flexible workspaces to their
global portfolios. This report examines the global trends taking place within the
flexible office sector and the implications for the Great Lakes region.
is disrupting the commercial real estate industry
Flexible
Office Space
2. Corporations
are embracing
flexible space
Shared workspaces have grown at an incredible
rate of 200 percent over the last five years, and
by 2020, it is estimated that there will be 26,000
flexible office locations worldwide.
From start-ups to Fortune 100 companies, flexible
space enables greater efficiency, potential cost
reductions and responsive solutions for a dynamic
business environment. Nearly half of corporations
already use some type of flexible office solution,
and by 2020, 65 percent of companies expect to
incorporate coworking into their office portfolio.
Why businesses are adopting a flexible
workspace model:
The term flexible space is used to describe a variety
of space types used by occupiers to increase portfolio
flexibility, reduce occupancy costs, and enhance collaboration.
The most prevalent type of flexible space is coworking, but
other examples include executive suites and incubators.
Coworking
a shared workspace
featuring an open,
communal environment.
The build-out often includes
communal lounges and
shared amenities.
Executive suites
feature an office-intensive
layout that provides a more
private and professional
setting than coworking.
Incubators
workspaces designed
for start-ups and
entrepreneurs. These
facilities generally provide
enhanced resources,
including mentorship and
early stage funding.
What is
Flexible
Office Space
• Reduce occupancy costs
• Increased agility during growth periods
• Avoid fixed long-term leases
• Ability to scale staffing flexibly
• Protection from market volatility
• Simplicity when penetrating new markets
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3. Who are the
big players?
The major providers of flexible space include
Regus, WeWork and Servcorp. These three
providers represent 42 percent of the global
market, but there are an estimated 7,600 flexible
space operators worldwide, highlighting the
fragmented nature of the industry.
Are there signs of
market saturation?
Closures have been isolated and contained
mainly to small operators. Competition has
increased as large operators have expanded their
foothold, which has placed pricing pressure on
many groups within the industry.
Given the rapid pace of industry expansion, it may
take time for some markets to fully absorb the
new supply and reach full occupancy. However,
we do not feel the market risks saturation, due in
part to growing demand from corporate users.
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4. for the Great Lakes
The expansion of flexible office space has been pervasive across the Great Lakes. The industry has more
than doubled over the last five years, with the opening of 122 shared workspaces totaling 1.8 million square
feet. The majority of shared workspaces are owned and operated by local businesses, however, global
operators such as WeWork and Spaces have been active in the region lately, scouting the market
for potential expansion locations.
Coworking spaces make up more than half
(59 percent) of the flexible office locations
in the region, while executive suites (29
percent) and incubators (12 percent) make
up the balance. Coworking spaces and
incubators tend to be located in downtowns
or in dense neighborhoods, while executive
suites tend to be located in suburban areas
near large employment centers.
Flexible operators by type
112Coworking
115Local
55Executive suites
42Global
22Incubators
32National
189Total
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
600,000
500,000
400,000
300,000
200,000
100,000
0
2 4 3 5 6 13 11 23 30 33 18
Square feet of flexible office space added by year
Number of flexible locations opened by year
Implications
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5. The average flexible office
location is 17,000 square
feet, roughly the size of
one floor in a downtown
office tower. Amenities
typically found at a flexible
office space include: free
beverages, snacks, wifi,
conference rooms, printers,
bike racks, shower rooms,
outdoor spaces, and
curated social events.
Pricing models for flexible
office space vary widely,
ranging from daily to
monthly to multi-year
contracts. On average
though, a dedicated desk
at a coworking facility costs
$227 per month, while a
dedicated private office
costs $511 per month.
Implications
for the
Great Lakes
Markets
Flexible office
locations
Flexible office
space (s.f)
Average monthly price
for a coworking desk
Average monthly price
for a private office
Pittsburgh 31 751,752 $240 $540
Indianapolis 25 632,789 $204 $508
Columbus 29 498,207 $207 $532
Detroit 38 392,477 $224 $564
Cincinnati 23 280,563 $268 $479
Cleveland 28 252,107 $196 $499
Grand Rapids 6 79,488 $266 $495
Louisville 9 48,887 $208 $473
Overall 189 2,936,270 $227 $511
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Detroit
Louisville
Indianapolis
Columbus
Grand Rapids
Cincinnati
Pittsburgh
Cleveland
150 mi
6. ForecastCorporate demand
Large-block corporate leasing will
become more prevalent.
Freelancer demand
Continued growth will supplement
the rising share of enterprise users.
Geographic reach
Operators are expanding to the suburbs
and covering more international markets.
M&A within industry
Acquisitions are helping to add scale
and enhance operators global reach.
Operator failures
Future market volatility will test commodity
players, with only the strong surviving.
Industry profitability
Margins are compressing given rising
costs and increased
What’s on the horizon
for flexible space?
The drivers of flexible
space demand
Cost
Challenge:
High capital expenditures for new
offices and an average corporate
utilization rate of just 60 percent.
Opportunity:
The adoption of flexible space can
reduce initial out-of-pocket costs,
enable greater efficiency and drive
down total occupancy costs.
Flexibility
Challenge:
Most organizations only have 24
months of revenue projections and
36 months of strategic planning.
Opportunity:
Flexible space can help organizations
buy time as they launch new initiatives,
establish growth projections and
develop long-term space strategies.
Innovation
Challenge:
In the age of digital nomads,
companies are seeking ways to drive
innovation and collaboration.
Opportunity:
Shared workspaces foster innovation
through increased employee
interaction, exposure to new
business concepts and cross-
pollination of ideas.
Talent management
Challenge:
Employers are finding it increasingly
challenging to manage their digital
workforce. Only 40 percent of
employees feel fully engaged in their
current workplace format.
Opportunity:
Retention is appreciably higher
among employees with access to
flexible workspace options.
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