Bright Future for Quickly Recovering Co-Working Space

Increased demand for shared space is driving growth for the largest coworking firms, Yardi’s CommercialEdge and CoWorking Café reported last week.

More than one-third of existing flex space is in the top five markets. Occupancy rates and revenue are celebrated on providers’ earnings calls.

During its second quarter earnings call, WeWork reported its occupancy rate had risen to 72% during that quarter, equal to the pre-pandemic rate in the fourth quarter of 2019. Regus, Spaces and other brands also are seeing a recovery in this office segment.

Vaccines and a waning pandemic are making co-working a viable option, CoWorking Café pointed out. 

“Shared space looks poised to grow in the future as an option to fill the gaps left by hybrid work and a cost-saving measure for tenants faced with inflationary and economic concerns,” according to the report.

“Medium and large firms that have embraced remote and hybrid work policies over the past two years will also look to coworking as a means to provide employees with meeting spaces, quiet work areas and amenities with lower total costs than traditional office space.”

Tech Companies Leading Co-Working Rebound

Jon Moeller, Managing Director, Silicon Valley at Raise Commercial Real Estate, tells GlobeSt.com, “We are seeing a demand in co-working coming back faster than traditional office space, especially as tech companies make this part of their hybrid strategy. 

“With challenges due to supply chain issues, return to office, and cash preservation, companies are re-evaluating their new office space with a focus on flexibility, move-in-ready spaces, and low upfront costs. 

“As most companies are uncertain of their occupancy levels, co-working is a low-capital expenditure, short-term solution during an uncertain time allowing for a gradual return to office strategy with elevated amenities, programming, and the ability to decrease or increase their headcount quickly.”

Avison Young Expects 5x to 10x Co-Working Supply

Charlie Morris, practice leader – flexible office solutions, Avison Young, tells GlobeSt.com, “Occupiers are driving the need for flexible supply growth and the evolution of workplace product diversification will be critical. 

“Depending on the market, we anticipate a 5 to 10X increase in the amount of flexible office supply over the next decade. Flexible operators comprise a majority of the existing flex supply and will no doubt have a significant role in the forecasted growth. With that said, the industry must understand that while coworking is flexible, flexible does not exclusively mean coworking. 

“Owners must first define how to incorporate flex into their overall asset management strategy and how to incorporate flex operators as appropriate. Identifying the right operator, which goes well beyond just the name brands, who can deliver next level services and workplace products needed to support the demand within that specific market is critical along with the structure of the agreement. 

“It is paramount for owners to understand the best way to incorporate flex into their asset management strategy and proactively engage with the operators which will best support said strategy.”