In the last five years, coworking spaces have seen a tremendous increase in popularity, not only among solopreneurs but also large corporations. Research estimates that there were approximately 70 coworking spaces established between 2017-2020, most often in large urban centers. In 2019, that number was around 11,000 and in 2020, it had reached 14,000 spaces. Companies that provide Coworking spaces, such as Signature Workspace are being turned to for workspaces for the new age of work. Especially after the Covid phenomenon.
Recently a completed and detailed analysis of the coworking sector was completed. Identified were key trends that will affect co-working in the near future and now. Here is a summary:
Commercial real estate is seeing a significant impact from the coworking industry. The five years preceding 2020 saw the rise of the commercial realty industry from an early recovery environment, which was characterized by stagnant construction and tightened lending conditions. The recovery of the economy has seen a strong increase in demand for services. The recovery is expected to continue for the next five to twenty-two years. The industry will continue to grow due to the continued economic recovery. Lender conditions are expected to improve for operators.
The performance and utilization of commercial real estate are being impacted by coworking. Coworking has led to significant net absorption in major metropolitan areas. The coworking industry is also promoting the expansion and upgrading of amenities. Landlords have made substantial investments in their base buildings as well as in their co-working spaces.
Lease Economics for Coworking
An analysis of coworking prices in major U.S. cities showed an average price of $139 per sq. ft. This is compared to a Class A Central Business District rental rate at $49.59, an 181% premium. This premium rises to 331% when you compare the average rent rates for regular office space.
Coworking Spaces are Growing in Number
Large coworking spaces were rarely larger than 20,000 square feet before 2011. Spaces with more than 100,000 square feet are common for long-standing businesses. The coworking industry has been embraced by startups, small businesses, and large corporations like Verizon and IBM. This proves that temporary, outsourced leasing is a viable option for companies of all sizes.
Increased Focus on Niches
Coworking giants are still struggling to make a profit. However smaller players who focus on niches are seeing faster growth and greater profitability. A coworking space can create a network of businesses that are supportive of each other and a shared economy by focusing on a specific niche.
Some coworking centers opened spaces all over the U.S. to target health-tech businesses. They can provide industry-specific expertise and a network of people who are interested in the same things. The serendipitous opportunity to create additional revenue streams and support members by working together in a common environment is a natural result.
Some food-focused organizations provide mentorship to members. It offers access to leaders in the business world and experts in sales, branding, marketing, sales distribution, eCommerce, supply chain management, and other areas. Entrepreneurs can benefit tremendously from this type of access. A maturing industry is marked by market segmentation and growth in niche markets.
Coworking is Now Global
There are coworking spaces in almost every major market worldwide. SoftBank, a Japanese telecom giant, invested more than $4 billion in the coworking industry. Much of this will be used to support Asian expansion. This includes the acquisition of Spacemob, Singapore’s largest coworking space. In 2018, the company plans to be in more than a dozen cities across Southeast Asia. China’s Ucommune also took over Woo Space and Wedo, two of the most prominent co-working businesses in South Asia. Another industry leader, Impact Hub, has eight locations in South America. Regus and WeWork have also announced plans to expand into Latin America.
Spaces are Becoming More Popular with Large Corporations
IBM, Verizon, and KPMG are among the big corporations that are testing coworking. Some even explore funding a new venture. Many companies are moving whole teams into coworking spaces. They can keep up with industry trends by placing teams in new locations that have the right technological resources and talent. Their teams have better access to education, innovation, and talent, with lower initial real estate costs and greater flexibility.
Recode shows that 25% of WeWork’s annual revenue comes from companies employing more than 1000 people. WeWork claims that this number has increased by 250% since 2017. We expect continued growth in this market segment.
Is Coworking Possible in an Economic Downturn?
There is still some question about whether the coworking sector can survive major market downturns. IWG is the only major player in the industry that has survived a downturn. They experienced rapid growth in the 1990s and were forced to file for bankruptcy protection following the dot-com bust.
Megalytics recently published a Coworking Industry Analysis. This analysis addresses the question “is coworking an alternative to renting space traditionally?” It also provides details about the current coworking trends.
This study examines non-traditional lease arrangements between co-working operators and landlords. The study compares co-working trends with traditional Commercial Real Estate industry trends in order to determine whether co-working is still viable as a viable option for leasing. This study examines key industry indicators, benchmarking and business performance, leasing strategies, national economic trends, and expansion plans. It also analyzes corporate consolidation between traditional commercial realty models and newer co-working companies. The report examines Signature Workspace’s size within the industry as well as the potential threats and opportunities that could impact the industry in the future. Contact Signature Workspace for more information on your new co-working space in the Tampa Bay area!