By Ryan Hoopes
When coworking initially started to take root in the U.S., fledgling business, contractors and freelances rejoiced. Finally, a place of business that wasn’t the local coffee shop. But as flexible workspaces have spread to cities across the country, coworking has become a staple for a different kind of client altogether.
Increasingly, we’re seeing a trend toward enterprise use of coworking space. In markets like Dallas, Atlanta and New York, Fortune 500, Fortune 1000 and middle-market companies have begun leveraging coworking space right alongside small start-ups and freelancers. And thanks to a variety of benefits to these larger companies, the trend is catching on quickly: In 2018, WeWork reported that corporate occupiers accounted for about a quarter of their members and revenues.
Perks of Corporate Coworking
What’s driving this trend? Namely, three key benefits for enterprises looking to use coworking as a real estate solution:
Recruiting flexibility. In our increasingly digital world, employees appreciate the chance to work remotely—especially if they don’t have to uproot the entire family to move cross country. To compete for high-quality talent, a number of large companies are leveraging coworking space to give employees options for far-flung office locations. It’s a win-win: The employee can stay put, while the employer can access the best possible talent without the need to open additional offices.
Cost savings. Coworking companies provide office space at competitive prices, usually on a month-to-month basis. Enterprises are recognizing that coworking space can help them save money, especially in times of change.
Consider an organization looking to expand into a new market. Thanks to companies like WeWork and Venture X, they could rent coworking space for their initial team and then grow on an as-needed basis—rather than having to invest in a permanent space from the get-go. This helps larger companies mitigate risk and stay agile, which is something every company seeks.
A jolt of creativity. There are numerous case studies about large companies breaking off entire departments into a coworking space, simply to help change things up or infuse a bit of energy. This can be especially helpful on a temporary basis for large projects: Move the team into a novel, energetic space and let them focus solely on the project at hand; get them out of the cubicle and into a collaborative environment, stocked with great amenities, and watch the creativity flow. Experiments in this arena show employees report greater satisfaction and engagement and that they work better and faster than colleagues who didn’t make the move.
Coworking and the Future of Real Estate
So, how will corporate coworking impact commercial real estate as a whole?
I expect this year we’ll continue to see the rapid adoption of corporate use, which will only further drive demand for coworking space, both across North America and around the globe. Already, coworking has grown by 200 percent over the past five years. We shouldn’t be surprised to see new competitors—both large and small—emerge from various parts of the real estate industry.
But at the same time, it’s important to keep the coworking craze in perspective. Flexible office space only accounts for 1.1 percent of total inventory in the U.S. and only 1 to 3 percent in the gateway markets, like Dallas-Fort Worth, where most coworking inventory is currently focused. By comparison, coworking inventory in the United Kingdom is reported to be around 5 percent- with some researches claiming it’s as high as 8 to 9 percent. Even if the U.S. were to hit that percentage of coworking space, it would still represent only a small fraction of the total inventory of office space.
Even as more corporations realize the benefits of leveraging some coworking space, it’s not as if Fortune 500 firms are suddenly going to adopt an “all coworking” approach. After all, established companies need things like HR and accountants and actuaries, as well as all the stability that comes from having a dedicated home base. That’s why, despite this latest evolution of the commercial real estate industry, companies are going to continue to look to landlords and real estate services firms to meet their portfolio needs in this new world. However, as the need for flexible workspace continues to grow at a rapid rate, landlords and real estate services firms will need to increasingly focus on delivering those relative solutions.
Through this shift and beyond, real estate professionals will need to advise and execute on all types of space for the occupier client, including coworking and other flexible office space options. This important shift in the industry is just one more way we can help our clients achieve their goals.
Ryan Hoopes is a leading Office Tenant Representation broker who specializes in coworking. His is a Director in Cushman & Wakefield’s Dallas office.