How Will the New Office Sharing Companies Affect the Office Leasing Market?

How Will the New Office Sharing Companies Affect the Office Leasing Market?

image9.jpg

If you are in the real estate business, you are likely to have heard by now about the new office sharing industry and some of the companies behind it – WeWork, Impact Hub, and many others.

You are also very likely to have noticed how disruptive this new industry has been. In New York for example, more specifically in Manhattan, coworking offices have already taken a third of the total office leases in one month of 2018.

However, this is only one example, and we need to take a better look at the industry as a whole and see what’s exactly going on and should the traditional office leasing companies be worried.

What Do the Number Say?

According to some studies conducted in 2018, there are more than 15,000 coworking spaces in the world. The number is continually increasing, and the number of coworking members is said to rise to 3.8 million by 2020 and to 5.1 million by 2022.

As for the US, the numbers are growing even faster. As you can probably already assume, this mostly has to do with the constant rise in the number of freelance workers in America, most of which are millennials who prefer working in shared offices, not only for the convenience but also due to the lower prices of leasing such offices.

Two states with the most significant number of co-working offices in the US, as well as with the highest rise in the number of such offices are California and New York, two of the three major economic powerhouses of America.

As for the companies, WeWork is the one that’s currently in the spotlight and likely to remain in it for quite some time. That’s mostly due to its enormous growth rate and expansion that surpasses all other office sharing companies. They currently have offices in 97 cities, 25 of which are in the US, and they’ve only been in existence for the past eight years. The current valuation of the company is $47 billion.

Should the People in Traditional Office Leasing Be Worried?

The numbers and statistics seem to be painting a clear picture – the coworking market is rapidly expanding, and so are the shared office companies.

However, the real question is, should traditional real estate owners and investors be worried?

It’s hard to say. On the one hand, shared office companies are leasing offices in non-office buildings like transformed factories, and in such instances, they do not pose a threat to the traditional office leasing businesses.

On the other hand, shared offices in buildings and areas that have long been in the office leasing market are also increasing in number and popularity, which can be a direct threat to the office leasing market.

So, it’s hard to say how disruptive this industry is going to become, especially when you take into account that it, as well as the freelancers and startups using their offices, are more vulnerable to economic downturns than traditional office leasing companies.

All in all, our recommendation for you is to diversify your business and become part of the industry as well. Those who don’t want to do it should know that the market is likely to stay safe for some time, but we can’t say for sure what the future will bring.

1031 Exchange for Investors and More! Your Commercial Real Estate Questions, Answered

1031 Exchange for Investors and More! Your Commercial Real Estate Questions, Answered

When is the Right Time to Buy an Investment Property if You're A Commercial Real Estate Investor?

When is the Right Time to Buy an Investment Property if You're A Commercial Real Estate Investor?