Even after years of continued growth, the co-working industry might just be getting started.
By 2030, flexible office space could make up 30 percent of the entire U.S. office market, according to a recent study by JLL. That compares to just 5 percent today.
“There’s still a long runway to grow,” Bill Rogers, broker with JLL, said at NAIOP’s co-working forum, held Tuesday morning in a WeWork location at 515 North State Street. Co-working’s rise “has been driven by the employee and the user, who is asking more from their working experience.”
Led by WeWork, the co-working market’s local footprint has tripled since 2014, now accounting for about 2 percent of Chicago’s overall office market. That has largely been achieved by luring individuals, start-ups and entrepreneurs, who previously didn’t have many options for small and short-term office space.
Now that the city’s 35 co-working firms have cornered that market, they are seeking a new client: the medium-to-large companies.
WeWork already has moved to cater to this “enterprise” client, which it defines as companies with more than 1,000 employees. Larger companies now make up about a third of the co-working giant’s total business, said Beth Moore, head of broker development for WeWork.
“We still have a lot of individuals and entrepreneurs,” she said. “Increasingly, our biggest segments that are growing are medium and large-sized businesses, and our enterprise businesses. That’s going to continue to grow.”
Corporations seem open to the idea of leasing within a co-working space. In New York, IBM took over an entire WeWork footprint, the first location where WeWork will cater to a single client.
“More and more, what I would call traditional corporate-type users and smaller clients are kind of getting over the hump quicker and considering as a real option a Convene or WeWork,” Rogers said.
As they try to cater to more traditional office users, co-working firms are now competing with landlords for the same business. But that hasn’t caused office landlords to totally shun co-working firms.
Instead, having co-working spaces in a building can be seen as a desired amenity among corporations looking at office spaces, said Greg O’Neal, senior vice president at Beacon Capital, which leases to co-working firms in a number of its Chicago properties.
“Tenants, the larger ones especially, want co-working in the building to accommodate short-term products or just the flexibility to grow into a WeWork in the case the building is 100 percent leased and can’t accommodate their further growth,” he said. “We welcome the shift.”
While JLL believes co-working’s growth will continue, many in the commercial real estate industry is wondering what an economic recession will mean for the industry. Even WeWork’s rise hasn’t been without growing pains: Parent The We Company recently laid off 300 workers, or 3 percent of its global workforce.
For co-working firms, having short-term and flexible space could actually be a benefit in an economic downturn, since companies won’t have to commit so much time and capital to locate in a co-working space as they would in a traditional lease, Tuesday’s panel of experts said.
Ultimately, however, the growth of the industry will be determined by its users, said Jillian Brown, account director at Convene.
“Our growth is based upon our clients and what they are wanting and needing,” she said.