Small Towns and Commuter Hubs Are an Expanding Frontier for Flexible Workspace

Flexible workspaces were once considered the preserve of startups and small businesses, but not anymore. What began as a niche solution for early-stage companies and freelancers has steadily moved into the mainstream of corporate real estate strategy. Now, companies of all sizes, including more than 80 percent of Fortune 500 companies globally incorporate this way of working. For many enterprises, flexible workspace is no longer an experiment or an overflow option. It has become a core part of how portfolios are structured and managed. Firms are increasingly looking to operate in a capital light model, moving cost and risk out of their fixed costs, while at the same time bringing productivity and wellbeing benefits to their people. In an environment defined by economic uncertainty and evolving work patterns, flexibility is becoming a financial and operational advantage rather than a tradeoff.

Demand for flexspace is flourishing well beyond central business districts and into local neighborhoods. This shift reflects broader changes in where people live, how often they commute, and what they expect from their workplace. The Instant Group’s 2025 Global Flexible Workspace Report shows the largest flexible workspace growth is outside of city centers, particularly in small towns and commuter hubs. These locations are increasingly attractive to both employers and employees seeking shorter commutes and more optionality. This is good news for landlords and property owners, who can see higher demand and higher profits in these areas, especially as enterprise organizations increasingly look to offer near-home locations to employees as part of their hybrid work strategies.

In smaller scale markets, U.S. flex office rates in the U.S. can be up to 4.4 times that of traditional office rates. This pricing power reflects both limited supply and rising demand from companies that are willing to pay a premium for flexibility, convenience, and speed to occupancy. Of the U.S. markets analyzed in this report, Plano, Texas, achieved the highest flex-space rate multiple (4.4x). Adelaide in Australia had the highest flex space rate multiple globally, 5.14x that of traditional office rates. For landlords in these markets, flex space is not simply an amenity. It is increasingly a high-yield use that can outperform conventional leasing.

Rates vary in major cities, but are typically between 2–2.5 times higher than traditional leasing on a per-square-foot basis, demonstrating that flexible workspace generally commands premium rates and drives increased return on investment for landlords. Even in more competitive urban markets, flex continues to deliver pricing advantages due to shorter commitments, bundled services, and the ability to adjust inventory as demand shifts. This has made flexible workspace an increasingly attractive option for owners looking to reposition assets or diversify income streams.

It’s not just landlords and employers that are benefiting from this shift towards more flexible ways of working. Employee outcomes are playing a central role in why demand continues to rise. In a study last year by IWG and Development Economics as they unveiled the Hybrid Working Calculator, 87 percent in the UK and 84 percent in the U.S. said that hybrid working had a positive impact on their work-life balance as a result of reduced commuting and working closer to home. These gains are becoming harder for employers to ignore as competition for talent remains strong.

Yet it’s not only travel that is prohibitive; the financial costs of commuting also add up. Housing affordability pressures and transportation costs are forcing workers to live farther from traditional employment centers. The same study found that by working locally four days a week, hybrid workers could save as much as $30,000 a year. Those savings translate into higher employee satisfaction and retention, reinforcing the business case for distributed, near-home workspace models.

Given the benefits of near-home flexible workspace, including employee productivity, financial savings, and wellbeing, it’s no surprise that demand is surging. What is notable is how quickly this demand is materializing outside of major metros. So too, are opportunities for landlords and operators to cater to the growing need for space outside of capital cities, particularly in markets that were previously overlooked by institutional office investors.

In the U.S., demand grew significantly in smaller markets. In small cities (25,000–99,999 people), it was up 160 percent; towns (5,000–24,999 people) up 101 percent; and small towns (fewer than 5,000 people) up 164 percent when comparing the first half of 2025 to the first half of 2024. These growth rates underscore how flexible workspace is filling a gap left by traditional office development. Comparatively, major cities in the U.S. with populations at one million or more saw demand grow by 54 percent over the same period. Recently, IWG opened co-working spaces in small towns across the U.S. including Franklin, Texas; Berwyn, Pennsylvania; and Bloomfield Hills, Michigan, signaling growing confidence in the long-term viability of these markets.

Suburban and smaller-town markets have emerged as the next frontier for work, doubling down on employee retention and wellbeing, while offering increased productivity and lower costs for corporates. For real estate owners, these markets offer a rare combination of rising demand, premium pricing, and limited competition. 2026 will continue to bring increased investment into smaller towns to cater to growing demand, particularly as enterprises formalize hybrid strategies and seek resilient portfolio structures. As flexible workspace becomes embedded in how companies operate, the winners will be those who align location, experience, and economics. Workers win, and so do real estate owners.