Commercial Investment Real Estate July/August 2016 | Page 8

MARKE T
TRENDS
Coworking:
Not for Entrepreneurs Only?
Coworking is a trend that has received a lot of press in the past year, but does it
have the legs to remake the office market? Several indications point to a growing
consideration of the office-sharing option both by the entrepreneurial class and the
corporate office. According the CBRE 2015/2016 Americas Occupier Survey, more
than 40 percent of the 226 corporate real estate organizations surveyed are using
or considering shared workplaces.
Why? Cost containment is one reason, as office lease rates rise in reaction to a
tightening market with increasing demand and limited new supply. In a 10-desk
example based in the Washington, D.C., market, CBRE calculated that coworking
offers a 15 percent savings over a traditional three-year lease.
Uncertainty is another factor in the decision. Rapid technological changes have
led to a business culture that prizes a quick, flexible response — a difficult maneuver
when a company is locked into a long lease contract. Other advantages include trans-
parent pricing, with no contracts or negotiations. In addition, the license agreement
“is usually considered an annual expense rather than a multiyear lease liability on
the balance sheet,” according to CBRE.
In the U.S., coworking is estimated to have grown by 21 percent a year for the past
five years. For example, WeWork is a company that leases office space at wholesale
rents, brands it through design and amenities, and offers it for rent to its member
base through an app. It is now the largest occupier of corporate space in the New York
metro market, leasing about 2.2 msf in 2015, having started with about 42,000 sf in
2010. Its coworking blocs usually average 40,000 sf, while smaller coworking brands
average closer to 5,000 sf, according to CBRE.
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July | August | 2016
Commercial Investment Real Estate