Coworking and flexible office space is not a fad; this subsector of the office market is on the rise and it’s expected to be part of the landscape for a long time, according to commercial real estate services firm Cushman & Wakefield’s new report, Coworking and Flexible Office Space.
As noted in the Cushman & Wakefield study, the world has grown increasingly accustomed to flexibility and convenience: smart phones and the internet in the communications arena, and coworking space in the office space market. “The concept is not new—even if the buzz is,” per the report.
What is new, is the numbers. According to the study, which covers 87 markets across the U.S., coworking space in the office sector has mushroomed over the last few years, with 5 million square feet of coworking square footage having hit the market annually since 2015. The rapid expansion is on track to continue in 2018, as 3 million square feet of new coworking space came online in the first half of the year. Numbers, however, can be deceiving. The U.S. office sector comprises 5 billion square feet, of which 47.8 million square feet, or just 1 percent, is coworking inventory.
Combined, six gateway markets—Manhattan, Los Angeles, San Francisco, Chicago, Washington, D.C., and Boston—dominate the coworking subsector, and New York City leads the pack by a wide margin. As of mid-2018, the Big Apple accounted for 12 million square feet of coworking space, 10.7 million of which is located in Manhattan. Los Angeles follows with 3.4 percent. All told, the six markets account for 23 million square feet, or roughly half of all coworking offerings.
“Based on current near-term projections, coworking space could easily triple from its current share in gateway markets over the next decade,” Revathi Greenwood, head of Americas Research with Cushman & Wakefield and lead author of the report, said in a prepared statement. “Total inventory could increase to over 5 percent of office space in many urban markets and as high as 10 percent in some markets.”
More Landlords, More Space
The U.S. is home to more than 200 coworking companies with at least one 5,000 square-foot-plus location, per Cushman & Wakefield’s assessment. International Workplace Group, formerly known as Regus, is one of the oldest coworking space providers, and 29 years after its formation, it still ranks as the largest provider of coworking square footage. WeWork, established in 2010, doesn’t have the age, but has the recognition; it is one of the most well-known names in the coworking industry. The company had roughly 200 locations in the U.S. alone at mid-year, and boasts a current estimated value of approximately $40 billion, compared to IWG’s value of roughly $3.5 billion. In the group of 20 coworking companies with a minimum of 10 U.S. locations, IWG and WeWork are joined by Premier Business Centers, Carr, Knotel and Davinci, to name a few.
“Occupiers’ demand for flexibility is not going anywhere,” David Smith, vice president with Cushman & Wakefield & co-author of the report, said in prepared remarks. “The largest coworking providers continue to expand their portfolios at a dramatic pace.”