Working from non-traditional spaces was once the realm of artists, writers and road warriors. People joked about those with computers taking up seats at coffee shops, cafes and restaurants, not seeing the larger trend coming into play. Today, it’s becoming a much different story.
It is forecasted that by the year 2020, up to half the U.S. workforce could be freelancers in some capacity. Yes, this still acknowledges many working from home, neighborhood coffee shops, etc. As of 2019, there are around 6,300 flexible workspaces in the U.S., a number that’s estimated to reach more than 13,000 by 2022. It’s no wonder co-working spaces seem to be popping up everywhere. While most real estate agents and industry professionals have been aware of the trend for a while, rapid growth means it’s important to be prepared for increased market disruption.
As the job market continues to shift toward younger generations, small businesses, individual entrepreneurship and gig work, many are seeking a different sort of work experience. Of course, everyone wants all the cool amenities and benefits of a large office space, but without the massive overhead. When faced with a choice between a traditional five-year office lease and a shared space, more tenants are considering the flexibility of setting up shop in shared or co-working spaces where the cost per square foot will typically be substantially higher. The benefits many see include the ability to scale up or down without the worry of incurring the costly penalties associated with breaking a long-term lease. Of course, the flip side is that short-term leases may create unsustainable rent increases that can end up being cost prohibitive for many firms and creating multiple relocations. Regardless, landlords with more traditional office properties should expect to be more flexible during negotiations. In order to stay competitive, the normal five-year leasing options may need to be compressed in some cases.
Real estate insiders recognize this trend is here to stay and may only grow stronger. While this is not a new concept, many of those once skeptical or nervous about co-working spaces are now openly embracing it. Larger, established players such as Regus and WeWork are being challenged by individual, locally grown brands and niche spaces geared toward specific industries in many markets. Many real estate companies are breaking free of tradition and partnering with existing co-working brands or building their own. Overall, flexible space will continue to be innovative and collaborative, thus continuing to be another option for tenants and landlords alike.
Keri Davies is vice president of Scottsdale-based LevRose Commercial Real Estate and a licensed real estate agent in Arizona, with 25 years of strategic sales and marketing experience. Davies has worked with more than 400 business leaders and corporate clientele in rightsizing and expanding their commercial office and retail portfolio both domestically and internationally.