WeWork is about to control 1.4 Million Square Feet of space in the Puget Sound. That is the equivalent of Columbia Center. WeWork now accounts for half of all co-working space the city has to offer. For growth context, they signed their first lease in 2013 for 50,000 feet…
Many companies are finding coworking and flexible office space to be viable options for their business, determining the tipping point between the rent premium charged for coworking space and the additional flexibility those formats provide via shorter, plug and play lease terms.
We have determined at least five potential paths the coworking segment of the office market could take over the next 5 years based on recent growth trends, the paths other industries have taken in similar circumstances and current changes the industry is undergoing.
Scenarios:
Accelerated Growth, reaching 20% of office inventory by 2023.
Growth continues at or near its current pace but we start to see consolidation within the industry.
Growth slows considerably to 5% per year. Groups like WeWork and Regus remain a force but find the market is saturated and end ambitious growth plans.
Coworking is challenged during the next economic downturn and undergoes significant consolidation. Occupancy reduces by 10%.
Coworking is completely disrupted by the next economic downturn. Occupancy is cut in half and only major players survive.
Our Prediction:
Scenario 2 most closely aligns with our expectations. As the industry matures, we will see consolidation as stronger and more mature players absorb smaller groups. As with any industry, the rate of growth will decelerate as the market matures.
Is CoWorking a Fad?
The model for how office space is used was changed radically by the coworking and flexible office sector. The operators have leased a substantial amount of space and in most cases dramatically improved them, making them more current and modern.
One thing is certain, well-amenitized and flexible office space with shared tenant resources are here to stay. Though the delivery will continue to evolve, tenants have responded to this office space model in a way that will not be undone.
For our full research article.
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