Growth in the co-working space – Lee Chandler

The traditional office has been relegated to the garbage heap of history. In a world of web designers, computer scientists, and content makers, the multi-story cubical filled space is growing out of fashion. Instead, Silicon Valley startups and other young companies have created creative and cheerful corporate cultures, which stand in sharp contrast to the strict and hierarchical structures of older organizations.  With Google and Facebook office spaces to compete with, arcane companies are losing out on young millennial hires who are increasingly demanding modern layouts filled with green features, free coffee makers, and game rooms.

However, over the course of COVID-19 outdated companies have found an opportunity to update their office space, appeal to younger hires, and increase productivity without the exuberant costs that come with renovating an office. The tool that companies are using to achieve this goal is the relatively new concept of “renting time” in shared offices. The idea was first brought into the public consciousness by eccentric WeWork CEO Adam Neumann, and since then the shared office space has been transforming the commercial real estate landscape. In a study conducted by JLL, the shared office space has become increasingly popular all over the world with companies like Cowrks, WeWork, and Smartworks leading the charge. The study also suggests that in countries like India, shared office space will overtake traditional workplace by the end of 2020. In the U.S the growth of shared office spaces has also been in on an upward trajectory with Forbes projecting to see more then 26,000 shared office spaces, hosting 3.8 million people by 2020. To put this growth into perspective, back in 2007 there were only 14 documented coworking spaces in the U.S.

Older companies like Delta Airlines, General Electric, and Bank of America, are only a few of the older companies who’ve opted to use shared office spaces instead of spending a fortune renovating their older buildings. Despite their growing popularity among Fortune 500 companies, coworking spaces are also the top choice for startups who need a physical location but don’t have the startup capital to buy or rent a full office. For example, tech goliaths like Lyft, Airbnb, and Dropbox all got their start in shared office spaces.

As an investor looking to diversify their portfolio, investing in coworking spaces is a fantastic option. Experts in the field, including Morris Levy, co-founder of The Yard, a New York-based co-working company, who suggests opening up coworking spaces in startup hubs and other millennial dominated areas. Cities like New York, Boston, Austin, and Raleigh are all hotbeds for startups who are increasingly demanding co-working areas that offer modern office designs without an expensive purchase price.  Not only is there a wide variety of areas you can invest in, but there is also a bevy of avenues for an investor to enter the coworking industry. The two most popular option are investing in a coworking space franchise which offers you a trusted brand name for a premium. The second option is digging in to the financials (build a coworking space financial model) of an office space and investing in possible value-adds on your own. Considering that coworking is estimated to experience a 5-year compound average annual growth rate of 21%, shared office spaces are a great add to any portfolio.

 

 

 

 

Cites Used

Alton, Larry. “Why More Millennials Are Flocking To Shared Office Spaces.” Forbes, Forbes Magazine, 15 May 2017, www.forbes.com/sites/larryalton/2017/05/09/why-more-millennials-are-flocking-to-shared-office-spaces/#555c174f69e8.

Creating A Financial Model for Your Coworking Space, 25 Oct. 2018, www.coworkingresources.org/blog/financial-model.

How to Invest in a Coworking Space, 22 Mar. 2019, www.coworkingresources.org/blog/investing-in-a-coworking-space#:~:text=%20Advice%20for%20How%20to%20Become%20a%20Coworking,things%20you%20should%20consider%20before%20investing…%20More%20.

“How to Invest in Co-Working Spaces.” U.S. News & World Report, U.S. News & World Report, May 2016, money.usnews.com/investing/articles/2016-05-11/how-to-invest-in-co-working-spaces#:~:text=The%20co-working%20culture%20at%20shared%20workspaces%20gives%20entrepreneurs,%28SPLS%29%20and%20Dropbox.%20An%20increase%20in%20co-working%20spaces.

smartworks, Team. “How Shared Workspaces Are Taking over Conventional Offices.” YourStory.com, 9 June 2018, yourstory.com/2018/06/shared-workspaces-taking-conventional-offices-2?utm_pageloadtype=scroll.

Written by Adam Jezard. “The Traditional Office Is Dead. Here’s Why.” World Economic Forum, Nov. 2017, www.weforum.org/agenda/2017/11/forget-the-open-plan-office-modern-work-spaces-should-be-agile/.

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