4 Ways Co-Working is Impacting CRE

Co-working office spaces are changing the way millennials go to work, and in the process, influencing the way cities grow and develop. These unorthodox workspaces have become a hot commodity over the past couple of years, but how exactly are affecting the CRE industry?

1. Co-working spaces are creating a surge in property demand

One way that the increased popularity of co-working spaces is benefitting CRE is by increasing the demand for old, defunct properties like decommissioned buildings in industrial spaces. For example, co-working office space provider, ATX, turned an abandoned warehouse building into a premier location for shared working spaces in Austin, Texas.

2. It’s creating a niche market for brokers

Because the co-working industry is still in its infancy, brokerages have been scrambling to see how this new market will affect them. In some ways, co-working can actually benefit many brokers, especially those who choose to capitalize on this growing trend. Ultimately, CRE is about building strong relationships, and most brokerages have built up extensive networks. Many co-working companies have recognized this and have begun offering incentives for brokers that help them expand.

3. Co-working companies are unpredictable

One of the biggest problems that brokers who decide to work with co-working companies could face is unpredictability. While companies like WeWork and Regis have established themselves as multinational titans in the industry, there are also a number of new companies trying to increase their control over the market. The problem comes in when brokers recommend shared office space seekers to companies that aren’t well established. Take Loosecubes, for example, which closed its doors in 2012 shortly after receiving nearly $8 million in funding.

4. Long-term sustainability isn’t guaranteed

The nature of the co-working industry is to provide short-term leases to a number of companies, mostly small-time tech startups. In optimal conditions, this provides the co-working company and the CRE investors with a steady stream of income. However, the challenge that a number of companies are struggling to overcome is determining who to lease office space to; more importantly, which small businesses are able to weather any economic downturn on the horizon?

On the CRE side of things, having a co-working company go under can result in tremendous losses. Primarily because landlords are expected to invest a considerable amount of money in renovating and getting their buildings co-working ready. This includes upgrading HVAC units, adding additional restrooms, and possibly adding additional stairs and elevators.

Moving Forward

For all intents and purposes, co-working office spaces don't appear to be a trend, but rather a fundamental shift in workplace culture inspired by more start-up companies and work-from-home employees, as well as an increasing number of individuals who’re looking for flexibility in their daily work. While there’s no denying that the prevalence of co-working offices will provide some sort of disruption in the market, that’s the nature of change and progress.

After all, companies like AirBnB and Uber created their own disruptions when they hit the scene. The best move for companies going forward is to come up with creative ways to succeed in an industry shared with co-working offices, not work against them.