The Institutional Real Estate Inc Sponsorship brochure, Connected-Investor Focused, We connect people, data and insights, sponsorship, events, IREI Products
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NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT MANAGERS 16 NAREIM Manhattan (7.7 million sf), Los Angeles (2.5 million sf) and San Francisco (1.3 million sf) led in the amount of coworking in urban locations, while four markets had more than 1 million sf in suburban locations: Los Angeles (1.2 million sf), Dallas/FW, the Bay Area and Orange County (all 1 million sf). As a percentage of total stock, Miami has the most coworking space, at 2.7 percent of the metro's 50.5 million square feet of space. Miami has many self-employed workers and a large number of start-up businesses in the telecommunications and medical sectors. The metro also has many small import-export businesses related to trade with Latin America that produce demand for small, flexible office spaces. Manhattan (1.7 percent), Los Angeles and West Palm Beach (1.6 percent each) also have above- average share of coworking space. At the other end of the spectrum are San Antonio (0.6 percent of total space), Houston and Dallas (0.7 percent each). Coworking is a young industry, so the numbers are likely to evolve on a metro level as the concept matures. However, demand seems to be based on a couple of main factors. One is the type of industries that proliferate in a metro. Demand is high in markets with concentrations of knowledge workers – especially information technology (IT) but also new media or industries such as biotechnology and telecommunications – that are friendly to startups. Another factor is the makeup of space within a metro. Demand is higher in metros where space is at a premium. Metros where coworking is low as a percentage of stock such as Dallas and Houston have low barriers to construction and high vacancy rates, making it easier for small companies to find cheap space in convenient locations. Fewer blocks of space exist in large coastal markets such as Manhattan, San Francisco and Los Angeles, which have higher concentrations of coworking space. Again, the industry is young and growing, so the numbers are bound to change, but when we plotted the percentage of coworking space against the vacancy rate in a market, there was a clear trend in which markets with lower vacancy rates generally had a higher proportion of coworking space. Coworking is more ubiquitous in urban settings, where it represents 1.4 percent of office space as opposed to only 0.9 percent of suburban office space. There are several reasons that coworking has germinated in urban areas. One is the critical mass of workers: few people commute long distances to cowork sites, and there are more workers in urban areas. Startups proliferate more in cities, and the social elements of coworking are more in tune with the urban environment. What's more, in suburbs there are a lot more blocks of small space available at low rent levels that are natural competition for institutional coworking firms. Think of converted single-family houses that are used by tenants such as lawyers, doctors, insurance agents, etc. that only need a room or two. That said, coworking is gaining traction in suburban areas and the model that attracts users with extra amenities, a connection to other small tenants and a fun environment could prove to be attractive for suburban office tenants. Manhattan (7.7 million square feet), Los Angeles (2.5 million sf) and San Francisco (1.3 million sf) had the most cowork space within urban areas. But as a percentage of stock within urban areas, Miami (3.5 percent), Austin (1.9 percent) and San Diego (1.8 percent) topped the survey. Just counting suburban areas, Miami (2.2 percent), West Palm Beach (1.6 percent) and Los Angeles (1.6 percent) led in coworking space as a percentage of total stock. Los Angeles (1.2 million square feet) led in total square footage in suburban locations, while Dallas, the Bay Area and Orange County all had slightly more than 1 million square feet. Coworking Urban % Co Working Sq Ft Miami 3.5% 698,470 Austin 1.9% 236,500 San Diego 1.8% 206,023 Manhattan 1.7% 7,650,722 Bay Area 1.7% 447,291 Los Angeles 1.6% 2,505,282 San Francisco 1.6% 1,251,104 Orange County 1.5% 21,000 Inland Empire 1.3% 60,458 Atlanta 1.2% 665,797 Seattle 1.2% 788,494 Denver 1.1% 461,024 Fort Lauderdale 1.1% 128,377 West Palm 1.0% 29,135 Sacramento 0.9% 105,898 Portland 0.8% 199,000 Dallas – Fort Worth 0.8% 519,729 Phoenix 0.7% 265,392 Houston 0.7% 689,586 San Antonio 0.6% 64,375