Office owners nationwide are still struggling with high vacancy rates and uncertainty around future tenant demand, but a growing segment has begun to emerge this year.
Coworking operators are seeing large companies expand their investments in flexible workspaces and bring back employees at higher rates than traditional offices, with some expanding their own footprints to meet growing demand. Market insiders said this could help fill some of the millions of square feet of vacant office space.
Of the 1,100 corporate real estate decision makers surveyed in JLL‘s Future of Work Survey 202243% said they planned to accelerate investment in flex space over the next three years.
“The change we have seen after Covid has been a shift towards flexibility,” We work Senior Vice President errol williams said. “What we are seeing and hearing more and more is that companies are increasing the proportion of flexible real estate that is in their overall real estate portfolio strategy.”
WeWork occupancy reached 72% across the company’s real estate portfolio of 641 global locations in the second quarter, according to your results report.
The company said U.S. bookings for WeWork All Access, a membership that allows customers to use any of the company’s coworking spaces, grew 64% year-over-year in September and 81% during the week. Next. Working day. He said US bookings grew 62% year-over-year in September for WeWork On Demand, a pay-as-you-go model that doesn’t require a monthly commitment.
This growth has occurred even as WeWork the share price has gone down 71% since the beginning of this year. But Williams said the pain in the market does not reflect the company’s strong fundamentals.
“There are macroeconomic things going on right now, but that doesn’t change the fact that we’ve fundamentally changed and the idea of how important flexibility is in the world of work right now,” Williams said.
Bisnow/Andrew Martinez
WeWork’s Errol Williams speaks at a Bisnow event on November 18, 2021 in Boston.
The coworking market has been expanding in the US, with even some less populous states like Nevada, Minnesota, and Utah ranking in the top 25 markets with the most coworking spaces. according to the CoworkingCafe market study released last week. California, Texas, Florida and New York had the most coworking spaces, according to the study.
Doug Resslerprincipal investigator of Yard Matrixparent company of CoworkingCafe, said that in the first half of the year, coworking space utilization increased 25% across the country.
“We really believe that coworking is one of the creative solutions that office owners and developers will use to better utilize their office space,” said Ressler.
“There are different types of creative solutions that people are looking for,” Ressler said. “Coworking is probably the biggest, and we really think it’s going to be double-digit in terms of improving office occupancy utilization this year.”
More than half of those who responded to CBRE‘s Spring 2022 US Office Occupant Opinion Survey said that flexible office space will be a significant part of its portfolio in the next two years.
Industrious CEO jamie hodari He said his company’s footprint grew 60% in the past year to meet the growing needs of office employers looking to provide their employees with more workspace options. Industrious has more than 150 locations around the world, according to your website.
company last month associated with Mitsui Fudosan America to occupy 40K SF on the 12th floor of the Homer Building in Washington, DC Industrious has also branched out into residential buildings, including in dc Y Californiathrough alliances with AvalonBay Y graystar bring coworking spaces closer to employees.
“A lot of what’s going on right now is that the real ways people want to work and the real workplace strategies that companies are trying to implement require a flexible partner to pull it off,” Hodari said. “It’s not just that people are afraid of long-term leases.”
Industrious isn’t the only coworking operator that sees a need to expand.
In May, GTI I said plans to open 500 to 700 new coworking spaces through its Regus and Spaces arms. This comes after the company was hit hard during the pandemic and filed Chapter 11 bankruptcy for a dozen of its US locations.
Smaller carriers are also seeing that same pattern of growth. based in boston work bar recently expanded into the suburbs surrounding Boston because most of its customers wanted to provide employees with options to work closer to home. The operator now has nine locations and a partnership with synergya Boston-based developer, to bring coworking space to some of its buildings.
“I would say that the biggest trend that we have seen come out of the pandemic is that the largest Fortune 500 companies are using more of our space and more of our locations to provide a solution to their employees,” said the CEO of Workbar. sarah travers said.
company last month Opened a new Workbar location in Woburn, a Boston suburb, and Travers said it opened at 50% and continues to outperform the company’s financial benchmarks.
“I see demand outpacing the overall market,” Travers said. “Even during the pandemic, our owners would tell you that we have always had a significant amount of foot traffic coming in and out of our spaces. I think that absolutely shows that the demand for coworking is outpacing the demand for traditional rented space.”
Large brokerage firms are seeing the trajectory of demand for coworking spaces and are buying into the market.
Courtesy of Laborious
The industrious CEO Jamie Hodari
Last year, CBRE acquired a 35% stake in Industrious, transferring Hana, your own brand of flexible workspace, in-house. In May, CBRE invested $100 million more in the company as another sign of their confidence in the industry.
“Part of what excited us about that investment was not just the capital itself, but the partnership with CBRE and the message that it’s not a traditional or flexible real estate ecosystem,” Hodari said. “You don’t have to choose one or the other, but these two things can live next to each other in a building.”
JLL has also accelerated the growth of its Flex by JLL coworking arm, opening a new location in Seattle and preparing to open a 15K SF flexible office in New Jersey in the second quarter of 2023. The company has already opened multiple locations in the US, UK and Australia.
“The reason we like the flexibility is that as we look at where the future office is headed, we expect the industry to continue to grow,” he said. Jacob Bates, responsible for the Americas of Flex by JLL. “We expect 30% of office space to be consumed flexibly by 2030.”
Some office owners are taking coworking spaces into their own hands. BXP has boosted its own flexible workspace offerings at a handful of its properties in Greater Boston, including one in the center on the roadY Irvine County. launched his Flexible Workspace+ brand.
“In terms of [office owners’] the sentiment towards flexibility and coworking has changed dramatically,” said Bates. “We’ve seen asset owners realize that this is part of not just an occupancy strategy, but it needs to be part of an asset owner’s strategy.”
Bates said he believes the growth of the coworking sector will help reduce overall vacancy in the office market.
“It’s going to help significantly,” Bates said. “It’s also becoming a big part of an asset’s service package, which also leads to it being part of an asset’s leasing strategy.”
