Is co-working the new TAMI?

Flex space tenants surpassed tech firms to lease space in Q1: Cushman

Adam Neumann and Amol Sarva
Adam Neumann and Amol Sarva

On the heels of SoftBank’s $4.4 billion investment in WeWork last year, some co-working rivals stepped up their fundraising game.

Industrious kicked off 2018 with a new $80 million funding round and Knotel followed up with an $80 million fundraise of its own. And with all that firepower for expansion, co-working companies are now rivaling Manhattan’s traditionally dominant firms for space.

Co-working tenants leased more office space than technology, advertising, media and information (TAMI) companies at the start of 2018 for the first time ever, according to Cushman & Wakefield.

These flexible space providers – a broad group that includes firms like Convene, which provides short-term meetings-and-events spaces – leased 858,546 square feet in Manhattan during the first quarter, or more than triple the volume from a year ago, according to Cushman.

By a margin of just a few co-working desks, these companies took down more space than the 857,120 square feet TAMI tenants leased during the first three months of the year.

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“When you just look at co-working, it’s been a strong-growing trend over the last two and a half years,” said Richard Persichetti, head of Cushman’s research team in New York. “I think as these co-working firms continue to grow and source funding, you’re going to see them invest more in Manhattan locations.”

TAMI tenants saw leasing activity decline by roughly 34 percent from the 1.3 million square feet companies leased at the start of 2017. Overall, Manhattan office leasing fell 7 percent short of the 1.3 million square feet leased during the first quarter a year ago, and the TAMI sector has been losing ground to other groups.

The financial services sector last year surpassed TAMI as the most active tenants, though there’s some debate as to how much space is being taken for traditional finance workers, and how much is being leased for the technology arms of Wall Street firms.

Knotel, which is now valued at $500 million after closing a $70 million Series B funding round earlier this week, signed 7 out of 19 co-working leases during the first quarter, according to CBRE.