THE FUTURE OF COWORKING AND FLEXIBLE OFFICE SPACE: FIVE POTENTIAL PATHS

Transcription

1 THE FUTURE OF COWORKING AND FLEXIBLE OFFICE SPACE: FIVE POTENTIAL PATHS JANUARY 23, 2019 PRESENTED BY: ALEXANDER (SANDY) PAUL, CRE, LAI SENIOR MANAGING DIRECTOR, NATIONAL RESEARCH Photo courtesy of Greystar PREPARED FOR: NAIOP 1

2 RAPID GROWTH OF COWORKING IN LARGE METRO AREAS SHARE OF OFFICE INVENTORY LEASED BY COWORKING FIRMS: 2016 VS S H A R E O F O F F I C E I N V E N T O R Y L E A S E D B Y C O W O R K I N G F I R M S 4.0% 2016 Share of Office Inventory 2018 Share of Office Inventory 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2

3 RAPID GROWTH OF COWORKING IN LARGE METRO AREAS OFFICE INVENTORY LEASED BY COWORKING FIRMS: 2016 VS M I L L I O N S O F S Q U A R E F E E T growth rate: 88% Primary Markets 24 major markets in NKF study = 95% growth rate growth rate: 120% Secondary Markets 2016 Coworking SF Occupied 2018 Coworking SF Occupied 3

4 WASHINGTON S ADOPTION OF COWORKING LAGS OTHER PRIMARY MARKETS SHARE OF OFFICE INVENTORY LEASED BY COWORKING FIRMS: 2018 S H A R E O F O F F I C E I N V E N T O R Y L E A S E D B Y C O W O R K I N G F I R M S 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.6% 0.0% NY LA SF Bos Hou Dal Atl Mia Chi Phi Was Phx 4

5 WHY DOES WASHINGTON LAG IN COWORKING GROWTH? The District s two largest tenant types have not yet fully embraced the trend Source: boardmember.com, NKF Research; January

6 COWORKING BOLSTERING DEMAND IN THE DISTRICT AS LAW FIRMS PULL BACK DISTRICT OF COLUMBIA OFFICE NET ABSORPTION BY SECTOR S Q U A R E F E E T O F N E T A B S O R P T I O N ( M I L L I O N S ) ? Proj. Coworking Net Absorption Law Firms Net Absorption Remainder of Market 6

7 A V E R A G E M O N T H S O N M A R K E T SPEC SUITES HELP ILLUSTRATE THE POPULARITY OF COWORKING TIME ON MARKET COMPARISON: SPEC SUITES VS. TO-BE-CUSTOMIZED SPACE DISTRICT OF COLUMBIA OFFICE SPACES 7,500 SF AND SMALLER Spec Suites To-Be-Customized Space Source: CoStar, NKF Research; January

8 A V E R A G E L E A S E T E R M ( Y E A R S ) LEASE TERMS GETTING SHORTER AVERAGE LEASE TERM WASHINGTON METRO AREA Tenants want greater flexibility in lease terms. Owners of traditional space are following coworking providers in meeting those needs

9 RECENT DEVELOPMENTS IN COWORKING AND FLEXIBLE OFFICE SPACE Management agreements New formats and leasing unconventional space Brokerage firms entering the market Asset owners acquiring existing coworking companies Asset owners offering their own coworking spaces or concepts 9

10 ACTIVE PLAYERS IN WASHINGTON S COWORKING MARKET Major Coworking Operators Major Owners with Coworking Operators as Tenants Space+ coworking/spec suite concept Management agreement with Industrious Zo amenities and services suite Town Hall concept and investment in MakeOffices 10

11 THE FUTURE OF COWORKING AND FLEXIBLE OFFICE SPACE FIVE SCENARIOS FOR THE NEXT FIVE YEARS 11

12 COWORKING IN WASHINGTON HOW DO THE FIVE SCENARIOS PLAY OUT IN WASHINGTON? As of % Scenario % Scenario 2 4.2% Scenario 3 Scenario 4 Scenario 5 0.5% 0.3% 0.8% 0% 4% 8% 12% 16% 20% P E R C E N T O F O F F I C E I N V E N T O R Y O C C U P I E D B Y C O W O R K I N G B Y

13 THE FUTURE OF COWORKING AND FLEXIBLE OFFICE SPACE: FIVE POTENTIAL PATHS JANUARY 23, 2019 PRESENTED BY: ALEXANDER (SANDY) PAUL, CRE, LAI SENIOR MANAGING DIRECTOR, NATIONAL RESEARCH Photo courtesy of Greystar PREPARED FOR: NAIOP 13