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CBRE: 85% of Fortune 500 RE execs plan some flexible-office solutions

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The possible WeWork IPO has put flexible-office space front and center. In May, WeWork reported $728.43 million in Q1 2019 revenue, but it also showed $264 million of net loss. That loss is a slight improvement over $274 million in Q1 2018. The year-over-year membership rose from 220,000 to 466,000.

From CBRE’s MarketFlash report:

“While questions have been raised about the profitability of these operators in a recession, it is unquestionable that the meteoric growth of the flexible-space sector is unprecedented in commercial real estate. Here is what we know about the (flexible space) sector today (based on the 30 markets tracked by CBRE):

  1. The top-10 markets account for more than 70% of the nation’s flexible-office inventory (25% in Manhattan alone). With nearly 4 billion sq. ft. of traditional office space in the 54 major metros tracked by CBRE, continued growth of flexible space is inevitable even under conservative estimates.
  2. In 2018 alone, flexible space in the top-10 markets grew by 25%, with Manhattan growing the most on an absolute basis (+4 million sq. ft.) and Seattle growing the most on a percentage basis (44%). Growth since the start of this cycle has been constant and is showing no signs of slowing. Flexible-space operators are currently in the market for more than 6 million sq. ft. of space.
  3. Flexible space as a percentage of total office inventory is around 2%, with San Francisco and Manhattan being the most saturated (over 3% each). In some foreign markets, such as London and Beijing, flex space accounts for more than 5% of total office inventory.
  4. Only 15 markets have more than 1 million sq. ft. of flexible-office inventory. Many U.S. markets have not even scratched the surface of this sector, including high office-using employment growth markets like Nashville, Austin and Charlotte.
  5. The top-five operators by square footage are WeWork, Regus, Spaces, Knotel and Industrious. The We Company (WeWork) and IWG (Regus and Spaces) hold 50% of the U.S. flexible-office inventory. Knotel and Industrious have another 10%.
  6. The Fortune 500 is engaged and intrigued. 85% of real estate executives plan to implement flexible-office solutions into their portfolio strategy, according to the 2018 Americas Occupier Survey. Enterprise customers are early in the implementation stage of flexible-office solutions as a portfolio strategy. If these strategies prove successful, there is potential for more explosive growth of coworking.l office market because of the value they provide to a broad range of occupiers.”

Click through to CBRE to see the rest of the report.