Sell for More News is a weekly blog series with interesting information from the world of commercial real estate.
Over the last few years, Coworking has taken the commercial real estate industry by storm.…then WeWork imploded and everything changed. WeWork accounts for nearly half of all the coworking space in major U.S. markets…and their appetite for more office space has faded significantly.
So how do we expect the coworking business to change in the new year?
Coworking leases get smaller
The coworking market will trend toward smaller lease sizes…with most deals being for a single floor or less.
For example, in the 4th quarter of 2019 the average coworking transaction size declined by 38%.
This downturn was largely attributed to WeWork’s leasing velocity slowing down, but also smaller companies finding more traction in the marketplace with smaller leases.
WeWork competitors gain ground
WeWork signed no new leases in the U.S. in the 4th quarter of 2019. Other coworking providers continued to expand including Industrious, Knotel, Convene, Venture X and Serendipity Labs.
Coworking centers will target class B and C properties
In previous years, many coworking companies targeted Class A buildings to attract the highest quality tenants. But as companies look to cut costs and become profitable, we predict that they’ll shift back toward leasing more Class B and C offices or repurposed warehouses.
Different business models emerge
While traditional models have coworking companies leasing large spaces from landlords…then subleasing smaller spaces to tenants of their own…other concepts have caught on.
Large landlords are already creating their own coworking spaces. These include Tishman Speyer (Studio) and Boston Properties (Flex by BXP) and many more.
Other coworking companies are looking to reach landlords by offering a management agreement that’s more akin to operating a hotel for a fee.
Large companies embrace coworking
We expect more demand for coworking spaces from large companies in 2020. While coworking is usually associated with freelancers, startups or smaller businesses…40% of the revenue in the coworking world came from large companies because of their need for fast and flexible leases. This demand will continue to grow.
One thing is for sure…coworking has changed the business of owning office buildings, forever.
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About Beau Beach, MBA CCIM
Beau is a tenacious Commercial Real Estate Broker, author and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.
Beau leads Beachwood which is a commercial real estate broker for sellers in the Nashville, Milwaukee and South Florida markets.
He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.
Beau can be reached at 800-721-3287, click to schedule a call or Beau@BeachwoodSells.com