NYC's largest commercial real estate tenant is WeWork: how will coworking change your building's operations?
Coworking is now a fixture in the commercial real estate market, there is no denying it. While there are questions about certain coworking company valuations, such as WeWork’s $10+ billion figure, it’s hard to discount the proliferation of coworking enablers like LiquidSpace, PivotDesk, Craigslist, InstantOffices, RocketSpace, and the original Regus. Not only are these tenant aggregators signing 12 to 15 year leases, CBRE surveyed over 200 major commercial real estate organizations and found that 40% are using or considering coworking spaces.
Some of the data is remarkable:
- For the U cheap cialis online.S. market, estimates peg coworking’s 5 year CAGR at 21%.
- Over the past 5 years, coworking space in Washington, D.C. has doubled.
- New York City’s largest commercial real estate tenant is WeWork, now covering more than 2 million SF.
What “megatrends” are driving viability of the coworking business model? CBRE’s first of a series of dedicated reports on coworking digs into the details, and it looks like certain structural elements of our new-normal economy mean this generation of coworking is much more durable than it was during the dot-com recession. CBRE’s research identifies four megatrends:
- A creaking economy: long term real estate decisions are difficult to make within a rapidly changing economic environment. Corporate occupiers are also faced with cost escalations and labor/skill shortages. This situation tilts companies to favor OPEX over CAPEX, and that shift plays right into the strength of coworking spaces. The cost escalations and skill shortages are driving companies to partner, consult, and outsource more: this drives the “gig-economy,” which drives demand for coworking space. Broadly defined, the U.S. Government Accountability Office estimates that, as of 2010, 40% of the workforce can by considered contingent. This figure is up from 35% in 2006 and CBRE pegs the proportion of contingent workers who support demand for coworking space at close to 10%.
- Advances in technology: mobile hardware technology, fast WiFi, and cloud computing technologies are lowering the threshold on corporate IT infrastructures, and reducing the need for fixed offices. CBRE’s Americas Occupier Survey reports that 32% of respondents prioritize flexible working arrangements, which includes working from anywhere, at any time.
- Urban density: Commercial real estate rents are driven by technology and related firms whose staff live in cities like Chicago, New York, Portland, and San Francisco, and who want to work downtown. The re-centralization of life and work downtown reverses the suburban office complex trend. What’s inside urban cores? Warehouses, industrial structures, and underutilized office buildings that are ripe for the type of renovations popular in coworking spaces. Think exposed brick, tall ceilings, large windows, polished concrete, and wood. Thom Mayne, the American architect, points out that in this economy the focus is not on the status associated to the corner office, but performance. Thom concludes spaces must reflect this new focus as well.
- Collaboration: Baby boomers are retiring, and millennials are moving in (although not always moving out). Millennials bring with them an interest in collaboration and community and a blurred sense of work/life balance. 47% of people in coworking spaces surveyed by CBRE report that networking/community is one of the top three reasons they use a coworking space.
If you haven’t already, now might be a good time to map out how the new demands of coworking might change how your building operates.