The Institutional Real Estate Inc Sponsorship brochure, Connected-Investor Focused, We connect people, data and insights, sponsorship, events, IREI Products
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NAREIM DIALOGUES SPRING 2018 15 by lesser blocks of time down to the hour. It didn't really take off, however, until after the Great Recession due to the culmination of trends that increased demand dramatically. These trends include: • GROWTH IN THE GIG ECONOMY. The number of workers who are self-employed has risen dramatically in recent years. One such worker type includes experienced knowledge workers who lost jobs during the Great Recession and now work as consultants. • ENTREPRENEURIAL WORKERS. This category includes founders and employees of start-up companies. • REMOTE EMPLOYEES. An increasing number of people work remotely, which is possible because of technology that enables people to be connected. This also helps companies keep overall space needs down and is a way of attracting talent that is not located near corporate offices. • LESS COMMUTING. Another trend boosting demand for cowork space is that workers are trying to avoid long commutes for quality of life reasons and to reduce the impact on the environment. • RELAXED ENVIRONMENT. Coworking provides a more social work environment that is attractive, particularly to Millennials. Community-oriented features provided by coworking spaces include food and drink, presentations from local restaurants or farms, exercise facilities, and social activities such as ping-pong tournaments and mixers. • CUTTING COSTS. As office rents continue to rise, especially in city centers, companies try to reduce their footprint. Office space per employee has dropped steadily over the course of the current business cycle, even as employment has grown. Core Net Global, a corporate real estate trade association, says that office space per employee has dropped to 150 square feet, down by one-third since 2010. Companies are using fewer offices with open work plans, cubicles are getting smaller and the need for paper storage has diminished as files are stored in the cloud. • LARGE CORPORATIONS. This is a growing segment of coworking demand. WeWork, which is focusing on larger tenants and larger blocks of space, leased more than 2 million square feet of space in 2016. While coworking will never replace all or most of the space leased by large companies, employers do enjoy the flexibility that comes with having cowork space. Companies whose employees work off site – accounting firms, for example – can avoid having space that is often empty, while at the same time have outposts near the locations where the workers are deployed. • TAX LAWS. Federal Accounting Standards Board rules also may play a role. Starting in 2019, corporations must treat lease obligations as debt on their balance sheets, which gives incentives to avoid long-term leases. The upshot is that despite limits, coworking provides to some degree a solution for the growing number of entrepreneurial and remote employees, can help to attract talent and improve work satisfaction, and enables companies to continue to reduce the long-term fixed costs associated with leasing commercial real estate. METRO ANALYSIS Yardi Matrix did a study to quantify coworking locations in 20 large U.S. markets. The study encompasses office buildings of 50,000 square feet, so it does not capture coworking arrangements in smaller office buildings. We found companies offering memberships at 1,166 coworking locations totaling 26.9 million square feet of space. We did not count the number of members in each location. Not surprisingly, the metros with the most amount of coworking space are large markets Manhattan and Los Angeles, yet 11 of the 20 markets had more than 1 million square feet of coworking space for lease. Manhattan has 245 coworking locations for lease with 7.7 million square feet, and Los Angeles has 158 locations with 3.7 million square feet. Other metros with a significant amount of coworking space include: Dallas/Fort Worth (1.6 million sf), Atlanta (1.5 million sf) and the Bay Area (1.5 million sf). Inland Empire (123,000 sf), San Antonio (194,000 sf) and Ft. Lauderdale (305,000 sf) have the least amount of space. Market CoWorking Tenants Sq Ft Manhattan Total 245 7,650,722 Los Angeles Total 158 3,702,972 Dallas – Fort Worth Total 88 1,565,144 Atlanta Total 76 1,519,969 Bay Area Total 48 1,485,882 San Francisco Total 50 1,416,292 Miami Total 59 1,379,098 Houston Total 71 1,295,804 Denver Total 67 1,164,063 Orange County Total 55 1,032,568 Seattle Total 40 1,004,705 Phoenix Total 42 789,644 San Diego Total 41 749,735 Austin Total 20 395,500 West Palm Total 25 376,975 Sacramento Total 12 375,587 Portland Total 19 340,000 Fort Lauderdale Total 22 305,927 San Antonio Total 18 194,375 Inland Empire Total 10 123,458 ©iStock.com/Portra