A recent report by our friends at Savills Studley revealed some interesting projections about the future of Coworking, especially in Manhattan. You can download the free report at the bottom of this page.
In the Yardi Matrix ebook we published recently, there was some unique statistics about Manhattan Coworking that dominated the industry landscape. It has by far the most square footage of Coworking space in the nation, at over 7 million sqft. But the Studley report shows that soon, the rapid growth might hit its peak.
Growing too fast?
Keith DeCoster, Savills Studley director of real estate analytics, told Bloomberg News, “the market is getting more fragmented as some hybrid models and different providers get into the space,” and he expects more landlords to jump into the mix. This would create intense competition for the biggest names in the industry, WeWork, Industrious, Convene, etc.
“Many shared-office-space providers are already starting to direct their attention to other markets that are not as saturated, such as Denver, Charlotte, Miami and Atlanta,” DeCoster added.
Manhattan could break a record this year with 1.3 million sq ft of Coworking space added this year. With basically half the year to go, it looks poised to shatter the previous one-year record of 1.6 million set in 2015.
But all of this could come to a head soon. The Studley report states that some established businesses are beginning to realize that shared space is not cost effective on a per desk basis. Granted, we know about the rise of corporate Coworking and how WeWork has leased space to IBM, Amazon, and MercedesBenz, just to name a few.
However, because the amount of space in Manhattan may reach 8 million sq ft by the end of 2018, and WeWork’s presence there represents nearly 20% of its global reach, there are signs that this could be a peaking point.
Like the Yardi Matrix report pointed out, Manhattan is by far the leader in total square footage, but behind several emerging markets already in terms of percentage of space used for Coworking. Miami, Austin, San Diego, among others have leapfrogged them in that department recently.
While Coworking’s rise has exceeded just about any projection, and it’s obviously more than a trend at this point, some estimates that had it taking up to 30% of traditional office space seem overstated. According to the Studley report, it wont reach this percentage any time soon.
This conclusion is partly due to the example of ‘teleworking’, which became extremely popular in the early stages of the internet. Some of the largest US companies opted for this trend, and it may have lasted about a decade or so. But within the last 5 to 6 years, these companies have backed off teleworking. They’ve decided they need a physical space to encourage collaboration and teamwork. (Hello, Coworking.)
Granted, the report states that it would hit its upper limit in Manhattan much sooner than it will in other markets. So this isn’t to be taken as a knock on the growth of Coworking. Quite the contrary.
Due to its rapid ascent, it has spread, and will continue to spread into markets outside the traditional powers. Its very likely that when Manhattan reaches the apex of its bell curve, other cities wouldn’t even be close to theirs yet.
Also, the economy needs to play a role in any projections for the Coworking industry. The Studley report questions where the industry could go if there is a drastic drop in our economy. Would that lead to a decline in memberships and closure of shared workspaces? Landlords would recoup their investment if the Coworking provider stays for 2-3 years, per the report.
For the most part though, the tone of the report is that this is not going to signify a drop off in shared office space as a whole. While its growth in Manhattan is deemed to be an unsustainable pace, the negative pullback should be containable, having strong and emerging markets throughout the nation and internationally now.
Studley creates fantastic quarterly real estate reports for a number of cities. To download any of them, click this link, which has a full list of all available.
For the Manhattan specific report, which was entirely Coworking centric, click here.
And of course, to see how the Yardi Kube platform can improve your shared workspace environment, please click the link below.