By John Arenas | June 4, 2016

Coworking Takes Hold with Corporate Occupiers: Disrupts Real Estate

The rise of the coworking movement is not just changing the way that startups work, it’s disrupting the entire commercial real estate industry as companies of all sizes are now demanding more flexibility-  instead of traditional long term lease commitments.  Office occupancy costs make up the second largest expense for most companies, so limiting long term commitments to office space provides companies with valuable agility and resilience.

As mobile technologies and the gig economy make the 9-to-5 workday and traditional office culture increasingly obsolete,  coworking enables a powerful new strategy for companies that want to attract and retain top talent by supporting worker mobility and workplace flexibility- while reducing real estate costs.

It’s not hard to see why.   In the same way that companies learned to shrink or grow their workforce on-demand with independent contractors and contingent workers, they are now applying the same approach to real estate, by opting for pay-as-you-go workplace models like coworking.  Workplace-as-a-Service offerings like coworking are causing a permanent disruption in the commercial real estate industry because companies are never going back to paying for staff or office space that they don’t need.

A white paper published last week by Jones Lang LaSalle’s workplace strategy group entitled “The New Coworking Era” puts it this way:  “Coworking is no longer perceived as a new age workplace practice, suitable only for start-ups. More and more companies of different sizes and from different industries are exploring the benefits”.

CBRE: 46% of corporate occupiers are using or looking to use coworking

According to a CBRE survey of 200 corporate real estate decision makers, 46% have now included coworking or are considering adding it to their workplace strategy.  The reports from JLL and CBRE indicate the potential for a massive shift in workspace demand away from traditional leases and toward coworking.

It appears that the commercial real estate industry is listening to its tenants, and is reinventing itself to accommodate the need for flexibility. Commercial real estate owners and investors are including coworking, shared tenant worklounges, event space and pre-built suites to attract tenants with greater flexibility and vibrancy. The trend is not limited to office buildings, and includes even residential towers, and retail real estate. Witness even Staples serving the mobile workforce by including a coworking offering inside its stores.

Commercial real estate investors are also partnering with coworking providers in order to participate in the economics as well as to ensure that tenants benefit from an integrated workplace amenity offering.

The commercial real estate  model is changing rapidly to adjust to a new marketplace reality.  With almost 50% of corporate occupiers looking to shift some long term leases to coworking, it is fair to expect that flexible workplace-as-a-service offerings like coworking will exceed 10% of all office space within the next 5 years.  That would be 1.2 billion (yes billion) square feet in the US alone, or 50 times the current inventory of coworking.  Now that’s disruption.