GlobeSt.com: How and why are co-working space linked to high-rent areas?

Birkenhagen: We see a couple of important factors at play. For one thing, say you're someone in a low-rent area looking to start a business. You may already have a guest room or a garage you can dedicate to the project, but someone living in a high-rent area is less likely to be able to afford a house or apartment with that extra space. It may be cheaper to use a co-working space than to try to upgrade to a three-bedroom apartment. It's interesting to note that the median rent for a two-bedroom apartment in the Bay Area is $3,377/month, which is approximately twice the cost of a two-bedroom apartment in the Los Angeles area, $1,798/month.

That “approximately twice” ratio is similar for two data points we tracked: The concentration of co-working spaces per 1,000 firms with five or less people in the Bay Area (28.64), is approximately twice the concentration of co-working spaces per 1,000 firms with 5 or less people in the Los Angeles area (14.18). The number of co-working spaces per 100,000 people in the Bay Area (36.05) is approximately twice the concentration of co-working spaces per 100,000 people in the Los Angeles area (19.76) There seems to be a very clear connection here, and as rent in L.A. catches up to rent in the Bay Area, we'll see the number of co-working spaces increase as well.

Another factor: High rent areas tend to be places getting an influx of new workers—that's what's driving up the rents. We spoke to Sarah Studer manager of co-working space ImpactHub in Seattle, who said that the spouses/partners of those new workers are turning to co-working spaces as a place to generate a professional network in their new city.

GlobeSt.com: Co-working is growing. What is your outlook for co-working on the West Coast in the next five years?

Birkenhagen: We expect it will continue to grow. The factors we cited above — the pioneering nature of the West Coast, rent increases, and influxes of new workers — only seem to be accelerating. Co-working seems to be a result of those factors so as they continue to be important, so will co-working.

GlobeSt.com: How are office landlords and owners responding to this change, and how should they be adapting?

Birkenhagen: Given that co-working seems to correlate with high rent areas, office landlords and owners may not have anything to worry about! Small start-ups can't afford their prices, but there seem to be plenty of larger, more established businesses that can.

GlobeSt.com: How is co-working changing and evolving from what it is today to deal with some of the challenges you outlined, like noise and privacy?

Birkenhagen: Well-funded companies like WeWork have the ability to experiment with different ways to enhance the positive aspects of co-working, and mitigate the negative ones. We think we're already seeing that.

The old term for a co-working space would have been a “shared office space,” which brings to mind a bunch of desks in a large room. Go to a modern co-working space today, and you won't see that. You'll see private areas for people who want complete focus, you'll see larger meeting spaces for conferences, you'll see a socializing area where people are making connections. Making connections may be the biggest shift. Co-working, as the name implies, is about working together and collaborating, not just about sharing a location.