Coworking has become a new normal in that it has become an expected and preferred workplace of many of today’s workforce. Among today’s workforce, Millennials now make up the largest segment of workers in the United States and they are bringing new meaning to the term “work/life balance.” Having been the first generation to be raised in the digital age, Millennials are motivated by a vastly different kind of work environment, these days, it’s all about the Experience per Square Foot. Millennials want to feel engaged at work and they want flexibility in how, where and when they work.
The strong Millennial presence coupled with technological advances utilized by a multi-generational workforce, has placed a much stronger emphasis on on-site amenities and the employee experience in the workplace. Successfully catering to this void is the re-emergence of the coworking industry, which has become a significant player in today’s office landscape. Coworking spaces provide resources and infrastructure to a generation that, increasingly, makes their living outside of the traditional office. As companies seek to enhance their workplace experience, coworking facilities have become an attractive concept to both corporations and freelancers alike. This type of flexibility and service is most advantageous for smaller users as well as those looking for a short term commitment. However, a growing company may find it makes more sense, from both a branding and economic standpoint, to rent a space of their own.
Orange County’s coastal coworking scene may not be as massive as neighboring Southern California markets such as Greater Los Angeles at over 3 msf or San Diego now at over 1.2 msf—and both still growing—but it is making a bit of a splash now with over 680,000 sf across this coastal market. To put Orange County’s coworking figure further into perspective, its total footprint size is just a bit higher than the Greater Downtown Los Angeles area, where coworking companies occupy more than 500,000 sf according to Cushman & Wakefield’s latest research tracking data.
Still in its infancy phase, coworking spaces only account for a fraction of Orange County’s 90 msf of total office inventory, but it’s a concept that appears to be in expansion mode.
Eric Kenas, Cushman & Wakefield’s Director of Research for Greater Los Angeles and Orange County has said, “As a whole, Orange County usually experiences some trickle effect with Los Angeles, and as a result we would expect it to also follow suit with its coworking growth trajectory although it is highly unlikely to ever actually match LA’s coworking footprint, based sheerly on inventory.”
Like Los Angeles, the central business district in Orange County, considered its Greater Airport Area submarket, has been a primary destination for coworking business—although companies are continuously positioning themselves in the suburban areas of both regions. Our research indicates the Greater Airport Area accounts for over 62% or 428,600 sf market share of Orange County’s total coworking space—within this figure, the Irvine submarket houses 57% of such facilities, while Newport Beach and Costa Mesa house 23% and 20% market share, respectively, within the Greater Airport area.
The suburban South County market comprises the second largest portion with nearly one-fourth or 23% of Orange County’s coworking footprint, with over half (55%) of that occupancy positioned in the highly sought after Irvine Spectrum submarket. Central County then makes up 12% market share, with the West and North County areas each respectively filling just 2% and 1% of the coworking space countywide.
The City of Irvine harbors the largest number of locations with a total of 15 between its Irvine and Irvine Spectrum submarkets. Newport Beach follows with six locations, trailed by Costa Mesa with four and Orange with three locations.
Holding the tightest grip on Orange County, Premier Business Centers and Regus combine for 28 coworking locations. Premier Business Centers leads county market share (square footage) with 277k sf in 15 locations, while Regus follows closely with 200k sf in 13 locations. Spaces, a Regus concept, ranks third with 102k sf in three locations, which factors its recent 41k sf lease in Irvine. And WeWork is fourth in occupancy with 65k sf of space currently in two locations, including its recent move in Costa Mesa. Other noteworthy coworking businesses in Orange County such as Industrious, Carr Workspaces, TechSpace and ServCorp each occupy less than 25k sf of space in a handful of locations.
Kenas also helped to note, “One of the reasons for rising interest from coworking users in Orange County and the surrounding communities has come by way of new creative product or newly renovated buildings that many of today’s users are seeking. Of course it also boils down to properties / build-outs being able to align with a coworking company’s business model, i.e. whether relying on more traditional office space versus a more creative, modern/open layout, etc.”
With the rise of an independent and mobile workforce, millennial influence, corporate partnerships and influx of start-up companies, Orange County’s coworking facilities have yet to outpace the demand in the market. Notably, is has recently been estimated that as much as 36% of today’s U.S. workforce are freelancing, while at current growth rate the majority of the U.S workforce will be freelancing by 2027—and common workplace options for them are coworking facilities. Given these factors and more, we anticipate there to be further growth and expansion ahead in the coworking sector as a viable (or complementing) alternative option for individuals and corporations. That said, coworking should also still continue to make up a small portion of the market’s total office inventory, which is dominated by more traditional as well as fast-rising modern creative space.
This expectation of course is also dependent on any economic and or market downturn, which then we will have to see how this growing segment would react under such conditions. We must remember, while coworking dates back to the 1990s and was able to broaden a bit during the Great Recession, the concept did not really begin to erupt, at least regionally, until after the Great Recession so we have not been able to test its durability and longevity during challenged market conditions. But, in all likelihood, the coworking model should continue to adapt as it has during the past several years and having Landlords and Tenants working more closely together to meet each other’s needs provides another advantage to its course of sustainment.