San Diego, December 19, 2025
The national office market is experiencing a significant contraction, particularly in San Diego, where construction activity has dropped by 44% year-over-year. Meanwhile, coworking spaces are on the rise, expanding by 16% and now comprising 2.2% of the office inventory. The shift to hybrid work models is driving this demand for flexible work environments, and small businesses are finding new opportunities in this evolving landscape. The trend shows a notable suburban expansion of coworking spaces as employees seek work-life balance closer to home.
National Office Market Shrinks as Coworking Spaces Thrive
Flexible Work Environments Rise Amid Office Market Contraction
San Diego is witnessing a notable transformation in the national office market, where a significant contraction is unfolding. With construction activity plummeting by 44% year-over-year and the development pipeline dwindling to just 1.7% of total stock, local entrepreneurs and businesses are finding new pathways to success. The silver lining in this trend is the rapid expansion of coworking spaces, which have surged by 16% in 2025, now comprising 2.2% of the total office inventory. This shift is primarily fueled by the increasing demand for flexible work environments as hybrid work models become more embedded in corporate culture.
The resilience of small businesses has never been more pronounced, as many adapt to changing market dynamics. With a reduced regulatory environment fostering entrepreneurial innovation, San Diego’s economic landscape has ample opportunities for community-driven ventures, particularly in coworking solutions.
Growth in Coworking Spaces
As of the third quarter of 2025, the national coworking market has expanded to 152 million square feet across 8,420 locations. This rise is especially evident in secondary markets such as Dallas–Fort Worth, Atlanta, and Phoenix, marking a broader national acceptance of flexible workspaces. Local and regional brands are thriving by providing niche, community-oriented spaces, while national operators continue to dominate in overall scale. The median pricing for coworking memberships remains stable at $225 per month, underlining the strong market demand for these adaptive work environments.
Suburban Expansion
The trend towards coworking is increasingly shifting from urban centers to suburban landscapes, reflecting changing employee preferences. Suburban areas now account for nearly as much coworking space as their urban counterparts, with the suburban share increasing by 3 percentage points to 47%. Urban submarkets, on the other hand, now embody 48% of the national flexible workspace market. This shift underscores a growing desire among employees for flexible work environments closer to home, driven by hybrid work models and an increasing emphasis on work-life balance.
Market Outlook
The contraction of the national office market coupled with strong growth in coworking spaces signals a transformation in workplace dynamics. Various businesses are rapidly adopting hybrid work strategies, leading to continued demand for flexible and cost-effective workspaces. This evolving scenario presents both challenges and opportunities for traditional office settings and coworking providers, making adaptability and innovation key themes in future economic discussions.
Frequently Asked Questions (FAQ)
What is causing the decline in the national office market?
The national office market is experiencing a significant contraction, with construction activity declining by 44% year-over-year, reducing the development pipeline to just 1.7% of total stock. This trend has created a substantial opportunity for coworking spaces, which have expanded by 16% in 2025, now accounting for 2.2% of the total office inventory. This growth is largely driven by the increasing demand for flexible work environments as hybrid work models become more prevalent.
How much has the U.S. coworking market grown?
As of the third quarter of 2025, the U.S. coworking market has reached 152 million square feet across 8,420 locations. This expansion is particularly notable in secondary markets such as Dallas–Fort Worth, Atlanta, and Phoenix, indicating a nationwide adoption of flexible workspaces. The median pricing for memberships remains stable at $225 per month, reflecting healthy demand. National operators dominate in scale, but local and regional brands thrive by offering community-driven, niche spaces.
What is the trend in the geographic distribution of coworking spaces?
There is a notable shift in the geographic distribution of coworking spaces, with suburban areas now accounting for nearly as much space as urban counterparts. The suburban share of national flexible space has increased by 3 percentage points to 47%, while the share in urban submarkets has decreased to 48%. This trend highlights the growing preference for flexible work environments closer to home, driven by the rise of hybrid work models and the desire for work-life balance.
What does the future hold for the office market?
The contraction in the national office market, coupled with the expansion of coworking spaces, suggests a significant shift in workplace dynamics. As businesses continue to embrace hybrid work models, the demand for flexible, cost-effective, and adaptable workspaces is expected to remain strong. This evolving landscape presents both challenges and opportunities for traditional office spaces and coworking providers alike.
Key Features of the Article
| Feature | Details |
|---|---|
| National Office Market Contraction | Construction activity declined by 44% year-over-year, reducing the development pipeline to 1.7% of total stock. |
| Coworking Space Expansion | Expanded by 16% in 2025, now accounting for 2.2% of total office inventory, driven by demand for flexible work environments. |
| Suburban Growth | Suburban areas now account for 47% of national flexible space, indicating a shift towards suburban coworking spaces. |
| Market Outlook | As businesses embrace hybrid work models, demand for flexible, cost-effective, and adaptable workspaces is expected to remain strong. |
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Author: STAFF HERE SAN DIEGO WRITER
The SAN DIEGO STAFF WRITER represents the experienced team at HERESanDiego.com, your go-to source for actionable local news and information in San Diego, San Diego County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as Comic-Con International, San Diego County Fair, and San Diego Pride Festival. Our coverage extends to key organizations like the San Diego Regional Chamber of Commerce and United Way of San Diego County, plus leading businesses in biotechnology, healthcare, and technology that power the local economy such as Qualcomm, Illumina, and Scripps Health. As part of the broader HERE network, including HEREAnaheim.com, HEREBeverlyHills.com, HERECostaMesa.com, HERECoronado.com, HEREHollywood.com, HEREHuntingtonBeach.com, HERELongBeach.com, HERELosAngeles.com, HEREMissionViejo.com, and HERESantaAna.com, we provide comprehensive, credible insights into California's dynamic landscape.
