To keep growing, co-working firms targeting more traditional office space users

Co-working could make up 30 percent of the national office market by 2030, in part by luring large corporate tenants, a panel of local experts said

TRD CHICAGO /
Apr.April 09, 2019 01:00 PM

Flexable office space is now targeting traditional office space users

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.


Related Articles

arrow_forward_ios
Joe Sitt and 905 W. Fulton Market (Credit: Thor Equities)

Thor Equities’ big bet on Fulton Market is paying off

Thor Equities’ big bet on Fulton Market is paying off
401 S. State Street (Credit: Google Maps)

Or best offer: Facing default, Loop office building hits market

Or best offer: Facing default, Loop office building hits market
Ald. Walter Burnett (27th)

Alderman Burnett to lift ban on resi development in Fulton Market

Alderman Burnett to lift ban on resi development in Fulton Market
Amazon CEO Jeff Bezos with 4306 120th Ave. in Kenosha and 23700 W. Bluff Road in Channahon (Credit: Getty Images; Google Maps)

Amazon is at it again in Chicago

Amazon is at it again in Chicago
John Murphy, head of Murphy Development Group and a rendering of 8000 N. Lincoln Ave. (Credit: Murphy Development; rendering via Lucien Lagrange)

In this market, a good construction loan is hard to find

In this market, a good construction loan is hard to find
Don Thompson and 212 North Canal Street (Credit: Cleveland Avenue, Google Maps)

VC firm led by ex-McDonald’s chief buys River West office building

VC firm led by ex-McDonald’s chief buys River West office building
Founder, President and CEO of Oxford Capital Group John Rutledge with Hotel Felix and Hotel Julian (Credit: Oxford Capital Group, Hotel Felix and Google Maps)

Oxford Capital designates 5 of its Chicago hotels for coronavirus housing program

Oxford Capital designates 5 of its Chicago hotels for coronavirus housing program
The 21c Museum Hotel at 55 E Ontario Street and the Hilton at 720 S. Michigan Avenue (Credit: Google Maps)

More hotels fall victim to coronavirus pandemic

More hotels fall victim to coronavirus pandemic
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...