For years, people have been talking about how unaffordable it is to live in San Francisco, but it is also getting expensive to work there. San Francisco's growing tech scene has driven up office prices, making the city the fifth most expensive office market in the world. Annual costs per desk average $16,204, while the average asking rent in Q1 was $74.64/SF, according to a JLL report.
To find more cost-effective office space, many startups and high-growth companies have opted for coworking and flexible workspace in the Bay Area. Those office products have also seen a rise in prices as both concepts increase in popularity. No longer just for startups, many larger, established businesses have opted for flexible workspaces, catering to a growing population of remote workers.
“We are seeing more businesses trade traditional offices for flexible workspaces and large enterprise companies are now joining freelancers and startups in this market,” The Instant Group Business Development Director Marie Phillips said.
The Instant Group is a workspace innovation company that places more than 7,000 companies a year in flexible workspace and leads research on the flexible workspace market. The company recently turned its attention toward researching the growing market for flexible workspaces in the Bay Area.
Several operators in San Francisco are focused on targeting tech startups, but there are a growing number of operators focusing on niche businesses in film, print and retail. With the significant growth of flexible space in the U.S., smaller operators have entered the market, competing with larger companies like WeWork. More than half of all coworking spaces are now run by independent operators. Some of San Francisco's most notable include Knotel, Bespoke, TechSpace and Werqwise.
The Instant Group analyzed the average monthly cost per desk in key neighborhoods, as well as the year-over-year growth in each of these submarkets. Last year, San Francisco experienced a 13% increase in centers offering coworking, flexible and hybrid office space. This was against an already established base, with high desk rates indicating the strength of the market.
The average cost per desk citywide is $1,046, making it the fourth most expensive city in the U.S., behind Boston, Los Angeles and Seattle for leasing flexible workspace. It is also one of the fastest-growing flexible workspace markets in the world, alongside New York and Los Angeles.
San Francisco’s FiDi is quickly becoming an established center for flexible workspace, seeing a 15% increase in centers offering workstations. WeWork and Werqwise each opened in FiDi earlier this year, and in June, Mindspace will open nearby with a 40K SF center.
Startups, tech firms and media companies are increasingly interested in Jackson Square office space. WeWork’s boutique center in the area is close to 100% capacity, illustrating that the area’s appeal as a work hub is growing. Spaces has also opened a new center at Levi Plaza.
Among rising flexible workspace prices, Downtown San Francisco saw the lowest cost per desk, at $950 per month. The neighborhood has seen significant revitalization following Twitter’s arrival as a tenant at 1355 Market. The social media giant has since renewed its lease on floors seven, eight and nine, which is approximately 215K SF. Brands like Dolby and Zendesk soon followed. Flexible workspace and coworking operators have since opened several locations Downtown.
As more companies continue to see upside in opting for flexible workspaces and coworking, prices will continue to rise.
This feature was produced in collaboration between Bisnow Branded Content and The Instant Group. Bisnow news staff was not involved in the production of this content.
