The Institutional Real Estate Inc Sponsorship brochure, Connected-Investor Focused, We connect people, data and insights, sponsorship, events, IREI Products
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HOW MUCH SHOULD WE WORRY ABOUT The most obvious current examples revolve around how e-commerce has altered the landscape for retail and industrial properties, but no property type is immune. The trends impacting the office market are arguably subtler, but the sector is transforming to meet the shift in demand for lower costs, more flexibility for corporations, a more entrepreneurial workforce, and tenants that care more about community and the environment. Coworking represents a small yet growing segment of the office market. A study by Yardi Matrix of coworking leases in 20 major markets found 1,166 co-working sites with 26.9 million square feet of space. That represents 1.2 percent of office space in those markets. Coworking has proliferated more in cities: leases encompass 1.4 percent of urban office and 0.9 percent of suburban office space. At 7.7 million square feet, Manhattan has by far the most coworking space, followed by Los Angeles with 3.7 million square feet. Miami has the most coworking space as a percentage of stock, at 2.7 percent, with Manhattan coming in second at 1.7 percent. Although there are numerous companies offering cowork space for lease, the field is dominated by Regus (9.4 million square feet) and WeWork (6.5 million square feet). The two industry giants account for nearly 60 percent of all cowork space leased in our 20 markets. Despite its growth as a subsection within the office market, data on the amount of coworking space within commercial real estate has been hard to come by. Yardi Matrix's study is one of the first to quantify the amount of square footage of coworking space in relation to total office space within markets. INDUSTRY TRENDS Coworking is not a new concept. Regus pioneered the "workspace as a service" concept in the 1990s, first in Europe and later in the Americas. The idea was to provide space for self-employed workers and for the small number of corporate employees that are traveling or working remotely. Regus initially aimed its efforts at traditional office employers such as law and accounting firms that wanted to have remote offices, in what was called "executive suites" space. Coworking is an evolved form of executive suites space that also encompasses increased amenities and more flexible leasing arrangements. Typically, executive suites require 1-year commitments while coworking members can purchase space CO WORK ING Commercial real estate has always evolved in ways that reflect technological and social changes. 14 Paul Fiorilla, Associate Director of Research, Yardi Systems