NYC and Miami Flex Office Prices Spike With Rising Demand
It’s a weird flex, but New York City, Boston and Miami are the priciest markets for coworking space.
While office leasing in Manhattan has flatlined and there’s just under 50 percent occupancy since Labor Day, demand for flex office space has increased, making New York City one of the most expensive markets in this category, according to a new study.
New York City has seen average monthly flex space rates per desk increase 9 percent from the fourth quarter of 2022 to $898 in the first quarter of this year, with tech companies acting as the dominant tenant in that market, according to a report by The Instant Group, a workspace data firm.
Boston averaged $740 per month per desk with no change in rates since 2022, while Miami was $666 per desk with a 6 percent increase over last year.
Most of this has been driven by a supply and demand imbalance, Emily Watkins, chief client officer for The Instant Group, told Commercial Observer.
“These are spaces that are actually being utilized way more than organizations’ core headquarter assets, so therefore all of the landlords that are sort of interested in the flex market and coming to fulfill some of that demand for more flexible, agile uses are seeing real opportunity there,” Watkins said.
And tenants are staying in flex space longer. Companies are now signing on for an average of 8.4 months, up from the 6 months on average they stayed in 2019, according to the report.
Part of this can be explained by how tenants’ perceptions of coworking spaces have changed since the pandemic: Once viewed as an auxiliary option, coworking spaces now offer more strategic options for tenants with less predictable outlooks, Watkins added.
“I think the whole concept of supply is evolving from just looking at what were more traditional operators of flexible space to now looking at how organizations can create that kind of a solution within their own assets, either through partnering with some of those more traditional operators like Industrious, or creating their own,” Watkins said.
Demand for flex space has increased across major cities on the continent, with meeting room bookings spiking 27 percent between 2021 and 2022 and the size of those leases growing by about 19 percent, according to the Instant Group. Denver, Dallas, Tampa, Las Vegas and Atlanta were the only markets that lost demand.
About 48 percent of traditional office landlords expect average lease lengths to shorten even further over the next five years. Shorter leases have already become just one of the many concessions that have been offered to tenants to get deals signed.
Mark Hallum can be reached at email@example.com.