Technology Solutions

Coexisting With Coworking

Onward Coworking in Chicago’s West Loop has the look and feel of a company that would rank as a best place to work: loft ceilings, exposed brick, a skyline view from the rooftop deck, and on-site happy hours. But most of the people there don’t work for Onward. They’re entrepreneurs, freelancers, telecommuters, and other professionals working outside the traditional office environment. They’re coworking.

Coworking is renting shared office space — a workstation, office, or conference room — on an hourly, daily, weekly, or monthly basis. It’s part of the broader sharing economy, where technology helps connect people with things not commonly shared with strangers — their cars, houses, tools, and even dogs.

Commercial real estate brokers aren’t losing million-dollar deals to coworking facilities, but the trend could impact the industry in a few ways.


More spaces like Onward are popping up across the globe. From 2011 to 2012, there was a 93 percent increase in coworking spaces, according to Deskmag, an online magazine that covers coworking.

Several economic factors are making coworking more common. Businesses are cutting costs by shrinking their office footprint, especially in urban areas. They’re using a more nimble workforce consisting of telecommuting full-time workers and remote freelancers. In addition, barriers to becoming a tech entrepreneur are lower than ever. The possibility of striking IPO gold on the next big innovation is turning many would-be office workers into CEOs of their own startups. They’re also looking for cheap space.

“About 75 to 80 percent of the people who use our coworking space are entrepreneurs who left a job to start their own business,” says Aron Susman, co-founder of TheSquareFoot, a coworking booking site. “They’re looking to get out of the house and add a social, collaborative element to their day.”

Coworking is suited for businesses or individuals who are overserved by traditional commercial real estate brokers and leasing arrangements, but underserved by hunting for space themselves. Most coworking takes place at dedicated coworking facilities, but businesses with open offices, cubes, or conference rooms can also rent their space on booking websites. (See table.)

Potential Impact

The changing makeup of the workforce is reducing the amount of office space businesses require. In a 2012 study, Norm Miller, professor at the University of San Diego’s Burnham-Moores Center for Real Estate, noted that office utilization rates were roughly 180 sf to 220 sf per worker. In five years, that number is expected to decrease to 100 sf, according to a 2012 CoreNet Global survey of corporate real estate executives. As a result, office tenants may factor in alternative work arrangements such as coworking when calculating their space requirement.

Tenant advisers can suggest coworking to potential clients who are starting new businesses. Renting coworking space frees startups from leases, giving them more time to assess their space requirements and the viability of their business plan. Independent commercial real estate professionals might also find coworking to be an attractive alternative to working from a home office or leasing a small office.

Commercial real estate professionals looking for new business should consider visiting nearby coworking facilities, especially incubators or accelerators, a variation on coworking for tech entrepreneurs. Uber, a ride-requesting app that has raised $50 million since 2010, started in RocketSpace, a Bay Area accelerator. The company now occupies about 25,000 sf of class A office space on Howard Street in San Francisco.

Visiting coworking spaces can also give commercial real estate professionals a glimpse into office design trends. A wider variety of office space at a coworking facility can help draw a broader clientele. As a result, these facilities often make creative allocations of space.

Look Before You Book

But commercial real estate pros should consider coworking’s limitations before recommending it to clients or booking space for themselves.

Loosecubes, a highly touted and heavily funded coworking booking service, went out of business in November 2012, five months after it received $7.8 million in funding. The founders didn’t explain why they closed, but its shuttering calls into question the need for similar services.

And not all markets are seeing the impact of coworking. New spaces are popping up across the globe, but they tend to be concentrated in urban areas where rents are high. Tim Schaffer, executive vice president of RED Brokerage in Kansas City, Mo., says coworking hasn’t impacted office space requirements in his market. “In Kansas City, we have the luxury of liberally using space because rents are reasonable,” Schaffer says.

Dennis LaMantia is interactive marketing manager at the CCIM Institute.


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