NEW YORK (Reuters) - Real estate brokers scoff that just a fraction of U.S. office space is occupied by co-working and other flexible workspace options, yet data shows over one-quarter of new leases signed in the past two years came from this burgeoning business.
A double-digit growth rate, driven in large part by the upstart WeWork, indicates co-working is more than a fad as more shared-space providers establish multi-city networks and landlords step into the fray with their own flex-space formats.
Commercial real estate is in flux and no one knows what the industry will look like in a decade, but sitting around won’t help the outcome, said Jonathan Iger, chief executive at the family-owned William Kaufman Organization (WKO), founded in 1924, which has launched its own flexible office space concept.
“It’s this whole sharing economy that we’re all very cognizant of,” Iger said, referring to the efficient use of space to lower tenant costs while allowing landlords to charge more per square foot.
Flexible workspace has been growing at an average annual rate of 23 percent since 2010, according to Jones Lang Lasalle Inc JJL.N, and including co-working, is now the primary growth driver in the U.S. office market.
(For an interactive graphic showing flexible office space growth, click: tmsnrt.rs/2FNerRO )
Co-working and other flexible workspace formats accounted for 18.1 million square feet, or 29.4 percent of new space that was leased in the United States over the past two years, JLL said in a February report.
By 2030, flexible space and shared amenity areas will account for 30 percent of office space, the report forecast.
Co-working got its start from freelancers who needed offices rather than coffee shops and was followed by start-ups that liked how it freed up capital for more hiring and other expenditures. Now large companies are a visible clientele.
But outside of WeWork, bankrolled by Softbank with a $4.4 billion investment, and flex space leader IWG’s (IWG.L) Spaces unit, no other co-working firm has established a nationwide U.S. network with dozens of locations. That may soon change.
Serendipity Labs, a Rye, New York-based firm, opened its first co-working site in Manhattan last week and plans more than 125 U.S. openings over the next three years after 18 firms signed area of development agreements, the company said.
Flexible office space provider Knotel has been rapidly expanding its network in New York and San Francisco, while co-working start-up Industrious in February raised $80 million to double its number of sites to up to 60 this year.