Salt Lake City is the fastest-growing flexible office space market in the U.S., according to a new report from commercial real estate company CBRE. Flexible office space is defined as leased space that can be converted to light industrial and then back again to office space.
The market’s flexible-space inventory grew to 772,000 square feet by the end of the second quarter of 2019, an increase of 350,000 square feet, or 82.9 percent, from a year earlier. Flexible space now accounts for approximately 1.6 percent of Salt Lake’s total office inventory, up from 1.1 percent a year ago. Still, that ratio comes in slightly below the U.S. average of 1.8 percent, indicating that there is still some room for the sector to grow in the Salt Lake area. For purposes of this report, Salt Lake City includes Salt Lake and Utah counties, CBRE said.
“A year-over-year inventory increase of nearly 83 percent is substantial, even with the understanding that flexible office space is a growing market segment that is just beginning to gain real traction in our Salt Lake,” said Lloyd Allen, managing director and principal broker of CBRE’s Salt Lake City office. “This report makes it clear that in the Greater Salt Lake market, the tech and startup industries are closely tied to the flexible office space growth. This type of office space allows companies the greatest amount of agility as they grow and adjust their business strategies.”
“The report also shows that the greatest concentration of flexible office space is in the Utah County North submarket near Lehi and the Point of the Mountain — an area that continues to experience elevated levels of development,” Allen said.
The Utah County North submarket accounts for 34.5 percent of the total market’s flexible space inventory and represents the highest concentration of any submarket in the Greater Salt Lake area.
CBRE outlines several growth scenarios for the flexible office space sector, which currently occupies a cumulative 71 million square feet 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 square feet. Even in a low-growth scenario, CBRE sees flexible office space claiming up to 6.5 percent of the market by 2030.
Fueling the 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 businesses.