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Wednesday
Jul202016

Coworking: More Than Just a Fad

1871, Chicago’s new co-working space, incubator and business accelerator. Image © Gensler.

Even though we have designed coworking spaces in many shapes, uses and sizes for several years, like many others, I’ve kept thinking the fad would eventually end: the novelty would wear off, and we’d have flooded the market with a lot of spaces that remind us of the pre-1999 dot com era landscape.

But I’ve changed my mind. The coworking phenomenon (yes, it truly is a phenomenon) continues to evolve, a harbinger that we’re in store for more evolution and maturation of this concept.

Some perspective: Between 2006 and 2009, about 70 coworking spaces had opened up, typically in major urban centers. By 2016 that number had reached around 10,000. With 40 percent of U.S. workers expected to be ‘freelancers’ by 2020 who will use coworking spaces as a primary workplace, this growth may occur at an even faster clip. According to Cushman & Wakefield, Manhattan alone has over 5.3 million square feet of coworking space, with Brooklyn owning another 1 million square feet. And it’s not just major cities that embrace shared workspace: coworking spaces are turning up in unlikely places, such as suburban shopping centers, or as an amenity to mixed-use apartment complexes.

At the Global Coworking Unconference Conference (GCUC) held in Los Angeles in March, a few data points emerged that drive home the point that coworking has hit the mainstream, and is here to stay:

  1. Coworking is getting bigger: In 2011, large coworking spaces rarely exceeded 20,000 square feet. We now regularly see spaces with over 100,000 square feet.
  2. Coworking continues to expand to new niches: A good example is MakeOffice's soon to be opened, 21,000 square-foot space in Chicago targeted at health tech companies, though there are coworking spaces for all manner of freelance architects, non-profits, musicians and others. Segmentation and growth into niche markets are clear signs of a maturing industry.
  3. Coworking is global: Coworking spaces exist on five of the six continents: Everyone needs workspace.
  4. Big corporations are moving into coworking. KPMG, Verizon and Grant Thornton are all exploring the possibility of funding a new coworking venture, or moving entire teams into coworking spaces, such as WeWork.

Gensler-designed tenant membership coworking space. Image courtesy of Lennar Multifamily Communities.

In its early stages, the growth of coworking was as much a social movement as it was a new way of working and using office space. Today coworking has become a business, a subset of the real estate industry, where the relevant metric is revenue per square foot (RPSF). What can we expect coworking to look like in the future? According to Drew Jones, partner at Openwork Agency, the next phase of the cycle looks like this: Slowly, floor by floor, building owners will, via new turnkey coworking solutions, convert their properties from being occupied by fixed, large tenants who need and want massive footprints to open, membership-based, multi-company campuses that are used (and paid for) on a month to month basis. New, robust software platforms—building operating systems—will manage all of this. Buildings will need concierge and community management services, but this can be paid for out of the revenue that otherwise would go to a coworking operator.

We are already seeing the transition to this future scenario in our Landlord Services clients opting to build out full floors as multiple spec suites. These suites are designed with features that approximate coworking spaces’ ubiquitous qualities—open pantries, a variety of huddle/meeting rooms and lots of flexible space for workstations and privacy options. These spec suites still have their own private amenities, but it’s now not a stretch to see these shared functions centralized in a larger scale, full floor open plan, serving multiple tenants. Over time, the mixture of private offices, open spaces, and shared resources kitchens, lounge areas, etc. that we now associate with coworking businesses will likely resemble what much of the general office landscape will look like. Millennials will be the largest generation at work and they are clearly expressing a desire to work in a manner consistent with other aspects of the sharing economy.

Gensler-designed tenant membership coworking space. Image courtesy of Lennar Multifamily Communities.

Hardly a fad, coworking continues to evolve by getting bigger, expanding into new niches, going global and attracting the attention of big business. According to Mark Corbett, founder of Pace Ventures, if the term coworking ever disappears from common use, it will only be because it becomes synonymous with our notion of working.

Matt Gammel is a leader in Gensler’s Landlord Service Studio in Los Angeles, CA. Routinely working with Landlords as clients, his interests lie not only in commercial office real estate assets, but in working with Ownerships of retail, education and multi-family assets as well.

Matt Gammel is a leader in Gensler’s Landlord Service Studio in Los Angeles, CA. Routinely working with Landlords as clients, his interests lie not only in commercial office real estate assets, but in working with Ownerships of retail, education and multi-family assets as well. Contact him at matt_gammel@gensler.com .