By: Nick Francic, Senior Vice President, JLL
The co-working industry is thriving. More than 27 million square feet of space is home to co-workers across the U.S., according to a new report from JLL research. Many small businesses, startups and entrepreneurs are leaving the traditional office setting behind in exchange for the convenience, perks and community that come with a shared workspace.
And, with more and more emphasis on workplace design and strategy, the industry’s growth is no surprise. Companies like Regus, WeWork, Industrious, MakeOffices and others provide popular shared spaces packed with trendy amenities and the latest technology.
Bottom line: we don’t foresee the trend toward shared spaces slowing anytime soon.
The Demand to Share Is Growing
As the number of independent workers increases, so too does the demand for co-working space. Freelancers and contractors already account for more than 34% of the U.S. workforce. Looking ahead, the U.S. Bureau of Labor Statistics predicts that the number of freelancers, temps, independent contractors and solopreneurs will reach 40% over the next five years.
A majority of the working class is also made up of millennials, who actively seek out a creative environment and flexibility when job-hunting (two features that make co-working spaces attractive to young professionals). It’s no wonder that many millennials turn to freelance work, potentially creating loyal co-working customers for years to come. In fact, Harvard Business Review found that, “People who use co-working spaces see their work as meaningful.”
Urban and Mixed-Use Submarkets Are a Sweet Spot for Shared Space
Although co-working space is a relatively new concept for some areas of the country—making up only 0.7% of the U.S. office market—they’re growing at an exponential pace in major cities. New York, Chicago, Los Angeles, Atlanta and Boston are currently the top five markets for shared office space.
Coincidentally, some of the happiest cities to work in include NYC, Boston, and Los Angeles, increasing the demand for office space in these heavily populated metropolitan areas. As a result of leasing in these in-demand locations, landlords are promised a certain level of success from high retention rates, and an influx of new tenants.
Co-working spaces are growing in local, up-and-coming areas too, including Pittsburgh, Cleveland, Columbus and Detroit. Below are just a few shared, flourishing spaces in the Great Lakes region.
- Alloy 26, which is Pittsburgh’s largest co-working space, focuses on entrepreneurs and tech startups.
- Downtown Cleveland is home to many new co-working sites, including StartMart, home to 100 entrepreneurs.
- The Perch in Columbus is a shared workspace in the Short North; a few members include Urbity and Bookbag Video.
- Bamboo Detroit is the city’s largest co-working community, with members including Atlantic Impact and Gray Capital Solutions.
As the desire to work in these Midwest cities continues to grow, the demand for workspace rises. On the bright side, the average desk rates remain conservative compared to larger urban areas.
The Caveat: Shared Offices Come at a Premium
Shared office space is all the rage, but it will cost you. Compared to the average Class A CBD rental rate of $29.17 per square foot in Pittsburgh and $49.59 per square foot nationally, a shared office price per square foot is $139 (a 379% premium in Pittsburgh and 180% nationally!).
Although these numbers may be disconcerting at first glance, shared office prices often cover amenities, such as office furniture and supplies, and food and beverages.
This price also includes the intangible features, like the opportunity to network with other talented professionals from different industries. Moreover, the convenience of flexible leases is another selling point especially attractive to startups, as their staff sizes often fluctuate.
Co-Working Is a New Norm, Regardless of Uncertainty
Despite its convenience that resonates with much of today’s workforce, the industry is ultimately left untested against economic downturn. Because the industry developed as a result of the recession, these typically low-cost leases may actually begin to increase in the event of a similar economic crisis.
Overall, shared workspaces are an economically smart move for small businesses and new entrepreneurs, as they offer hard-to-beat flexibility and advantages that may not come with the traditional office.
Download JLL’s new report on shared workspaces for more information.
About the Author
Nick Francic is a Senior Vice President in JLL’s Tenant Representation Group, based in Pittsburgh, PA. Nick works primarily with assisting corporate clients in analyzing their real estate needs and developing strategies to align real estate initiatives with overall business plans. Connect with Nick on LinkedIn.