Based on available information, we have triangulated the US virtual office TAM to be $43.7B, which is likely a low-end estimate. This figure assumes that home-based business owners are likely to comprise the majority of the population that would potentially be interested in the address, communication and assistant services provided via 'virtual office' services.
For the purposes of this request, we interpreted 'virtual offices' using Servcorp's definition: "virtual offices provide an office address for communication and correspondence purposes, a secretary to handle some work duties while you're not there, and a call handling service that includes message taking." Our research indicates that virtual office services are offered by serviced office providers like Servcorp as well coworking spaces like WeWork. While there is pre-existing market research specific to coworking spaces and serviced offices, there is no comparable market research available specific to the virtual office segment of those two markets. For this reason, we have triangulated the TAM of the US virtual office market using the standard bottom-up calculation: [average revenue per user] x [number of potential users]. All sums are in USD. Below you'll find details of both variables and our final triangulation.
OVERVIEW: The annual average revenue per user is estimated at $2,952.
Our research of business and industry media sources did not generate any pre-compiled assessments of the average revenue per user for virtual offices. We have therefore estimated an average based on comparative costs for four companies: Servcorp, Regus, Davinci and Pacific Workplaces, largely because these represent the most recent and most explicit cost comparisons currently available.
Monthly costs vary by location; for example, the Servcorp monthly cost for its Virtual Office Package ranges from $159 in Chicago to $399 in New York City. (Please note that while the Virtual Office Package also includes coworking/serviced office benefits - as do many virtual office services - it is the only package that includes both mailing and communications services).
MONTHLY COST COMPARISON
Multiple sources (here and here) put the Servcorp Virtual Office Package at between $224 - $250 (average $237). Comparable services among competitors include: - Regus: $279-350 (average $315) - Pacific Workplace: $269 - Davinci: from $149, but includes a unique $150 setup fee. Spread out over 12 months, that setup fee adds $12.5 per month. (150/12 = 12.5). Average therefore equals $162).
AVERAGE MONTHLY COST
CALCULATION: (237 + 315 + 269 + 162) / 4 = $246
Averaged together, we can estimate the average monthly cost to be $246.
AVERAGE ANNUAL COST
CALCULATION: $246 x 12 = $2,952
Based on the estimated average monthly cost, the estimated average annual cost would therefore be $2,952. It should be noted, however, that virtual office contract commitments vary from 1-12 months, which adds an unknown degree of variability to the estimated cost.
NUMBER OF POTENTIAL USERS
OVERVIEW: The estimated number of potential users for virtual office services is 14.8 million, at the low end.
As noted above, virtual office services are often accompanied by coworking space or serviced office space use benefits. Of the four competitors used for this research, the lowest-cost virtual office provider (DaVinci) is also the only one that doesn't offer some inclusive physical space use benefits. Functionally, this means that a significant segment of the virtual office user base is also using (or at least has inclusive access to) coworking or serviced office options, which further underscores the overlap between these segments. Because these use-case percentages cannot be neatly parsed out, due to lack of any available granular data, we have chosen to focus on the home-business user segment as the representative user base for this TAM, for two reasons:
1) It is the only segment for which there is quantifiable data.
2) It is the most likely segment of the demographic outlined below which would be primarily interested in address and communications services.
Relative to the type of people who use virtual office services, the NY Post noted in 2017: " A growing number of business clients — ranging from solitary millennial entrepreneurs to multinational companies — are turning to the services of “micro” or “virtual” office providers in a quest to either establish themselves, impress clients or backers or set up branch offices on the cheap." Other industry assessments of market demographics are similar. However, as is indicated by ServCorp's 'Top Ten Companies That Use Virtual Offices,' the majority of use-case highlighted for these top ten companies is physical space use. Together with the NY Post assessment, this indicates that multinational companies could reasonably be assumed to use virtual offices primarily as branch offices or as physical locations for non-local freelancers, since they already have corporate addresses and communication services.
For this reason, we have excluded corporate users from our potential user base for virtual office services. Our assumption is that, while some corporate users might make use of the address and communication services, they are highly likely to prioritize the physical space use. We have also excluded individual users who aren't associated with their own business, since there was no relevant information available on this segment of the user population and it was only mentioned in a geographically-specific context. It is therefore reasonable to assume that the final triangulated figure may be on the low side, given these exclusions.
HOME-BASED BUSINESS USERS
The US Small Business Association (SBA) estimates that there were 29.6 million small businesses in the US in 2014 (the most recent data available on their 2017 fact sheet). Of these, about 50%, or 14.8 million, are home-based businesses. If we assume that all of these are potential users for the virtual office services specific to address and communication services, we can consider the 14.8 million home-based business owners to be the low end majority of the virtual office user market.
VIRTUAL OFFICES TAM TRIANGULATION
We have triangulated the TAM of the US virtual office market to be $43.7B, with the caveat that this may be on the low end, given demographic outlier exclusions.
[average revenue per user] x [number of potential users] = TAM
$2,952 x 14.8 million = $43.7B
To wrap it up: our research indicates that home-based business owners likely represent the majority of the potential user population for purely-virtual office services. Based on the average annual cost of using a virtual office ($2,952) and the number of home-based businesses in the US (14.8 million in 2014), we have triangulated the low end of the virtual office TAM to be $43.7B.