San Francisco, CA

CBRE Analysis: Rejuvenated Flex-Office Sector Positioned to Facilitate Long-Term Changes in Office Use

San Francisco’s flex market trims almost 1 million sq. ft.; Remains eighth-largest market overall, tied for second-most penetrated

08 Feb 2022

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The North American flex-office sector has evolved through the pandemic into a more sophisticated version of itself, gradually shifting to rely more on large companies as users of flex space than on startups and individuals, according to a new report from CBRE. Flex space’s versatility also has made it a frequent option for companies striving to accommodate new changes in how they use office space.

Nationally, the flex sector, a rapidly expanding niche prior to the pandemic, has slimmed down since early 2020. CBRE’s annual analysis of the sector found that, in the 12 months ended in September, North American flex-space providers collectively trimmed their square footage by 9 percent to slightly more than 80 million sq. ft. Similarly, the sector’s share of overall office space declined to 1.75 percent from roughly 2 percent.

San Francisco had the third-greatest net loss of flex space among the 49 markets studied in the report, down 959,000 sq. ft. Yet San Francisco is still the eighth-largest market overall, at 2.7 million sq. ft., and is tied for the second-highest level of penetration, with flex-office space representing 3.2 percent of the overall office market.

“The flex sector, which has right sized to a degree in San Francisco, is an important part of our office ecosystem. Flex spaces allow companies to be nimble in growing or contracting their operations, which is critical in the Bay Area with the highest concentration of venture-capital backed firms in the Americas. Flex space can also be used to adjust an office portfolio quickly as companies implement hybrid work and gain a better understanding of their employees’ new office-use patterns,” said Joe Wallace, president of the San Francisco Bay Area, CBRE.

Having reset itself, the flex sector is poised for growth this year in both physical occupancy levels and square-footage gains as big companies increasingly embrace the format’s versatility to handle changing staffing levels and fluctuating office attendance. A CBRE survey of 185 U.S.-based companies found that large companies anticipate adding more flex space to their office portfolios. Last year, nearly a quarter of the survey’s respondents had a significant portion (more than 10 percent) of their office portfolio in flex space. By 2023, half expect to be at or past that threshold.

To that end, major flex-office providers recently reported gains in their business with big companies, or enterprise users.

Different Flavors of Flex

CBRE defines flex space to include multiple formats of office space leased for shorter-than-traditional terms. That includes coworking, which often entails communal desks and common areas used by a flex operator’s occupants. But it also includes faster-growing models, such as private suites and enterprise offerings, which dedicate offices or entire floors for exclusive use by individual companies.

Among flex options that have gained traction as companies experiment with new work arrangements are the core-plus flex model in which users occupy long-term space and flex space in the same building or campus, and subscription-based services that allow employees to work from any of a flex provider’s locations across the market, country or globe.

“The flex industry matured in the past two years,” said Christelle Bron, Leader of CBRE’s Americas Agile Real Estate Practice. “Building owners now are far more involved in facilitating flex options in their properties, sometimes providing flex space on their own without a third-party manager. Companies can choose from a variety of flex options to suit their office needs. And flex providers are expanding into secondary markets.”

Market Comparison

CBRE analyzed flex office in 49 North American markets, finding that 15 recorded a net expansion of their flex square footage in the year ended in September, 28 notched a net contraction, and six saw no change. The biggest expanders were secondary and satellite markets such as suburban Maryland (5.9 percent gain). Houston (5.2 percent gain) was the largest market to post an increase.

The ranks of the largest markets didn’t change much despite flex providers paring their square footage in many. Naturally, there is overlap between the largest markets and the most penetrated.

To read the full report, click here.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at