Forty percent of respondents in a recent CBRE occupier survey said they use or are considering using shared space, including co-working space. While co-working spaces have typically appealed more to startups and freelancers, large enterprises are starting to take space in co-working facilities, according to the CBRE report, the first in a four-part series.
“Companies are under pressure to secure talent in competitive markets and innovate faster,” said Georgia Collins, senior managing director, Workplace Strategy, CBRE. “The employees these companies want to attract and retain regard blending work and life as integral to their happiness and success, while innovation is often linked to exposure to new ideas and perspectives. Because co-working facilities can offer employees more choice while also increasing their exposure to new people, networks and ideas, many organizations are beginning to explore offering access to them as part of their broader real estate strategy.”
While interest from large corporations remains limited, co-working spaces – typically updated versions of executive suites in which tenants share workstations and amenities such as kitchens and conference rooms – can present opportunities, particularly as companies are venturing into new markets.
Demand for co-working spaces by companies small and large is in part driven by the flexibility of the model and lower costs as average office asking rents have been on the rise nationally, jumping 4.8 percent year-over-year, as of Q3 2015, according to CBRE.
This demand has spurred growth in cities such as Washington, D.C. and New York City, where the amount of co-working space has doubled in the past five years. The sector has also piqued the interest of landlords looking to reposition ailing, often older office buildings as creative office space popularity is soaring. Many owners are reimagining and subsequently repositioning Class A buildings to attract more diverse and dynamic tenants and uses.
This increasingly diverse demand from occupiers and landlords suggests the co-working sector is better equipped to withstand a downturn than it was during the dot-com bust and the subsequent recession.
“Innovations and growth in the segment are tied to a number of enduring megatrends that are shaping workplaces and the business environment more broadly,” said Julie Whelan, Americas head of occupier research, CBRE. “These durable trends suggest that the new developments in shared workplaces are here to stay.”
With the growth of co-working spaces in the US estimated to be experiencing a five-year compound average annual growth rate of 21 percent, the CBRE report also identifies megatrends driving this growth and long-term sustainability of the co-working model. Among the megatrends are economic uncertainty, which affects long-term real estate decision making; technology and the ability for people to work from anywhere, anytime; the desire for community in the work environment, particularly among millennials; and cities, particularly gateway cities where the cost of real estate continues to increase.
Part 1 of the report can be accessed here.
CBRE collaborated with Longview Global Advisors on the production of this report.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.