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Yardi Corom
Yardi Matrix has completed the first report that quantifies th
e amount of office space dedicated to coworking in office buildings with 50,000 square feet or more in 20 large U.S. markets.
“Coworking represents a small yet growing segment of the office market,” the report says, noting that that 20 markets contain more than 1,100 coworking space encompassing almost 27 million square feet of space. This total represents 1.2% of the total office space in those markets.
Shared workspace originated in the 1990s to provide space for self-employed workers and employees traveling or working remotely. The practice expanded after the Great Recession, driven by a growing gig economy, cost-cutting strategies and other factors. Today, the report says, “coworking represents a small yet growing segment of the office market” that helps companies accommodate remote employees, attract talent, promote work satisfaction and reduce leasing costs.
Eleven of the 20 metros in the Yardi Matrix study have more than 1 million square feet of coworking space for lease, led by Manhattan, N.Y., with 7.65 million square feet in 245 spaces and the Los Angeles office space market with 3.7 million square feet of coworking space in 158 locations.
Nine other metros have at least 1 million square feet dedicated to coworking. Miami has the most coworking space as a percentage of total stock, at 2.7%.
“Demand is high in markets with concentrations of knowledge workers—especially IT but also new media or industries such as biotechnology and telecommunications—that are friendly to startups [and] in metros where space is at a premium,” the report says, and lower in metros such as Dallas and Houston that have low barriers to construction and high vacancy rates. The practice is more prevalent in urban settings due to the concentration of workers there and the tendency of startups to proliferate in cities.
Key risks of coworking to landlords includes maintain revenue during a downturn, short-term leases that lack the protection of long-term commitments, and small firms and entrepreneurs who might opt to work from home when budgets are squeezed. “The industry has grown during the long economic recovery and certainly will be tested the next time the economy hits a bump,” the report says. However, it continues, “over time, the industry is likely to develop its model to be able to survive recessions and changes in business operational trends.”
Last year, Yardi acquired WUN Systems, a workspace management platform provider, to help real estate companies leverage shared workspace for improved revenue and customer retention.
View the full Yardi Matrix report, titled “Shared Space: Coworking’s Rising Star.”
