What’s in this post? Definitions and statistics about these types of commercial office real estate:
According to the EIA.gov¹, there’s more than 16.6 million square feet of office space in the U.S. Statista² found that office investment and rental rates were valued at about $51 billion in 2023. Although there’s been a shift in hybrid and remote work, the office real estate class remains high-value and in-demand in most major metropolitan areas.
There are three classes of office buildings with 10 common subtypes that are important to know about. The three classes of office spaces are grouped by the amenities they offer, the rental price, location, age, and appearance.
Class A Office Space
Premium office experiences in a newer building
Lots of modern amenities and high-end like high-speed internet and electrical vehicle charging stations
Adjacent to public transportation
Close to several dining and entertainment options
Around $30 to $60 per square foot.³
Class B Office Space
Older than class A buildings
Some modern amenities like convenient on-site parking and natural lighting
Located outside central business areas
Cafeteria-style or cafe dining options
Around $20 to $30 per square foot.
Class C Office Space
Older buildings for offices on a budget, sometimes a hub for businesses that primarily function off-site
Fewer amenities, the primary feature is the office space itself
Below-average rent
Industrial or service-oriented
Around $10 to $20 per square foot.
With rising office vacancy rates at a record 20.1% in the second quarter of 2024, according to Axios research⁴, it’s more important than ever to be aware of the different types of office buildings to understand the types of tenants that commercial space might attract, as well as opportunities for investment.
Don’t confuse office space classes with other building types within commercial real estate. Although some of these types of office spaces are building types, not all commercial real estate is classified as office space, even if they have office spaces (such as in manufacturing and light industrial CRE). We have a separate piece on 9 types of commercial real estate.
9 Office Building Types
Coworking Spaces
Coworking spaces, sometimes also called “work and social spaces,” are alternatives for freelancers, remote workers, entrepreneurs, and small businesses that are looking for a quiet, professional space for them to do work. It’s been an emerging trend over the past 5 years that has risen in popularity post-COVID. Here are the characteristics of coworking spaces:
Short-term leases and private rentals
Lower commitment when compared to long-term contracts
Attractive, competitive amenities to attract customers
Variety of workspace options from rentable cubicles or offices to group collaboration spaces
Internet, reception, and printing services included
In Q2 of 2024, there were around 7,000 coworking spaces in the U.S., according to Coworking Cafe research. But the amount of coworking spaces has been steadily rising year over year. With the prevalence of remote workers who prefer coworking spaces to get out of their home offices once or twice a week, this building type is likely to stand the test of time.
Did you know? Biscred rolled out a new search feature in 2024 that includes company keywords. Why mention this here? Our built-in search engine can help you find companies and CRE professionals who specialize in, cater to, or have knowledge in specific topics. We searched “cowork” and found 123 companies and 2,761 CRE professionals in the Biscred database.
Flex Office Space
Flex office spaces, sometimes referred to as multi-use office spaces, take traditional dedicated workspaces and rent them on more flexible terms. Very similar to coworking spaces, these office spaces are populated by remote workers and other business professionals who need a temporary month-to-month office. Here are the characteristics of a flex office space:
Month-to-month, flexible rental contracts
Furniture included in rental cost
Range of workspace configuration options from private offices and meeting rooms to more open-plan layouts
Shared amenities for all tenants
Front desk, IT, mail, and cleaning services included
According to Cushman & Wakefield research⁵, the number of U.S. flex offices spaces has increased 6% quarter-over-quarter up to the first quarter of 2024. These spaces are popular with individual remote workers as well as startups that need a more flexible, inexpensive option. The importance of great flex office space amenities cannot be overstated, as this is what will attract and retain consistent rentals.
Flex office space mentions found through Biscred’s search engine:
Hybrid Office Spaces
The hybrid office space is a strategy that businesses have been adopting to adapt to employee preferences to work hybrid instead of fully on-site. Hybrid office spaces are usually smaller and only open certain days of the week when employees come into work. For commercial real estate, hybrid office space designs have:
Mixed office and social spaces
Smaller than the company’s total headcount, as all employees won’t be in the office at the same time
Private and quiet meeting spaces
Configurable office furniture that’s easy to rearrange
It was found that 52% of U.S. workers preferred a hybrid work model, according to Gensler research⁶. The hybrid office space strategy is an alternative to fully remote work. While fully remote work can save a lot of money on office costs, workers and managers are concerned about the communication issues that can sometimes come from fully remote work. The hybrid work strategy is still cost-effective, but accounts for workers who prefer to work primarily from home.
Hybrid office space mentions found through Biscred’s search engine:
High-Rise Office Spaces
High-rise office spaces are skyscraper office buildings that have more than 10 floors. For this reason, they’re almost always located in major cities, where there are advantages to building as vertically as possible. Unlike low-rise, or mid-rise buildings, high-rise office buildings have the following characteristics:
A lot of premium amenities
Prime, downtown city locations close to a lot of transportation options
On-staff security
Higher cost per square foot
The U.S. has 894 skyscrapers⁷, but any office building that defines a city skyline could be considered a high-rise office space. The luxury amenities and stunning views make high-rise office spaces highly attractive to corporations and other highly successful businesses that want premium office spaces for their employees.
High-rise office space mentions found through Biscred’s search engine:
Traditional Office Spaces
Traditional office spaces have been around for several hundred years in various forms. Some 18th and 19th century offices could even be considered traditional offices. The characteristics of a traditional office space are:
Desks and offices alongside separate meeting rooms designed for individual privacy
Client-facing spaces for professional interfacing
Long-term leases greater than a year
Unfurnished; client brings furniture and decor
Maintenance and equipment costs not included
The traditional office space was often characterized by multiple cubicles and other private spaces, as the prevalent strategy for most businesses was for each employee to prioritize their individual work. Property managers and investors have sought to shift their properties toward hybrid spaces to attract modern companies.
However, there are some benefits to running a traditional office space, such as the security of long-term leases and the lower overhead with maintenance, equipment, and furniture costs being offloaded to the client. Many high-rise office spaces operate as traditional office spaces.
Traditional office space mentions found through Biscred’s search engine:
Creative Office Space
Popular in creative industries and startups, the creative office space is a total contrast to the traditional office. Creative office spaces prioritize collaboration in open coworking spaces rather than isolated cubicles and offices. Some characteristics of a creative office space are:
An interesting, eco-friendly, and innovative building design
Vibrant decorations
Open floor plans
Flexible work and group collaborative spaces
Creative spaces can also be attributed to the rise in the creator economy market size⁸. With more artists and creatives looking for specialized, collaborative workspaces, it’s easy to see why creative office spaces are so popular.
The differences between traditional and creative office spaces are primarily in the design of the building and the marketing of the spaces. Creative offices are a lot more attractive to modern businesses but can often have the same rental terms as a traditional office space.
Creative office space mentions found through Biscred’s search engine:
Contiguous Office Spaces
A contiguous office space is a smaller workspace that has multiple office spaces adjacent within the same floor or in the same building. These spaces are often referred to as “suites.” The characteristics of contiguous office spaces are:
Office suites with multiple suites on a floor or within a building
Smaller offices (often used in a hybrid model where all employees aren’t in-office)
Fewer office distractions
Amenities, break rooms, and cafes run by the building rather than the business
A contiguous office space can have crossover with the other types of office spaces that we’ve listed. A contiguous office space is very flexible for real estate developers because of the wide range of rental options available to tenants. A larger business can rent multiple suites if they need more space, whereas a small business using a hybrid model has the option of a single, smaller suite.
Contiguous office space mentions found through Biscred’s search engine:
Executive Office Spaces
For an office space to be an executive suite, it has to be attractive to C-level business positions (CEO, COO, CFO, etc.), who are often the key decision-makers in selecting office space. Executive office spaces will usually have:
Premium spaces with high-quality, shared amenities that are run by the building, such as:
Security
Reception areas
Conference rooms
Break rooms
Fully furnished with luxury artwork, decor, and furniture
Versatile, allowing a business to quickly move in and set up business
Smaller with private office spaces
An executive office space needs to be luxury and state-of-the-art, as executives will host client meetings in the space. The size and cost of an executive space will depend on the needs of the business and the location of the office. Some executives may prefer smaller office spaces where they alone can be located, while others may want their office attached to a contiguous or traditional office space.
Executive office space mentions found through Biscred’s search engine:
Managed Office Space
Managed office spaces are sometimes also called bespoke offices and workspaces as a service. This type of workspace has the rental company far more involved in the management of the property. Its characteristics include:
Quick setup and move-in for businesses
Lower initial costs and flexible, short-term rental agreements
Utilities, security, and amenities included in the lease.
Configurable to business needs
A bespoke office space like this can be thought of as the parent class for flex and shared workspaces. Unlike flex and shared workspaces, which are meant for individuals and small businesses, managed office spaces also include spaces suitable for 10+ employees who want a dedicated space to work. Managed offices can also be short-term or long-term contracts, depending on the property needs.
Managed office space mentions found through Biscred’s search engine:
Sources
1 U.S. Energy Information Administration, 2018 CBECS Survey Data (This is the most recent survey available), accessed 2024-10-21.
2 Statista Research Department, Office real estate in the United States - statistics & facts, accessed 2024-10-21.
3 ACREREP, WHAT IS THE AVERAGE PRICE OF OFFICE SPACE IN THE US?, accessed 2024-10-21.
4 Axios, Office vacancy rate hites record high, 2024-07-09, accessed 2024-10-21
5 Cushman & Wakefield, FLEXIBLE OFFICE: A COMPONENT OF OCCUPIER SPACE STRATEGIES, accessed 2024-10-21.
6 Gensler, Executive Summary: The Hybrid Future of Work, summer/fall 2020, accessed 2024-10-21.
7 World Population Review, Skyscrapers by Country 2024, accessed 2024-10-21.
8 Exploding Topics, Creator Economy Market Size (2024-2030), 2024-03-11, accessed 2024-10-21.
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