As co-working companies continue to expand across New York City, they are increasingly fighting over the same vacant spaces.
“There’s a bidding war,” Industrious’s co-founder Justin Stewart said at a panel discussion hosted by The Real Deal and co-working company Spaces on Thursday. “If you have a WeWork against a Spaces against an Industrious against a Knotel — that’s happening very frequently and we’re seeing it more often than not.”
Stewart shared the stage with Spaces’ founder Martijn Roordink, Bond Collective’s founder Shlomo Silber and Jonathan Wasserstrum, who co-founded the tech-centric commercial real estate brokerage SquareFoot.
Wasserstrum said the increasing competition for space among co-working companies is also becoming a problem for some traditional office tenants who are in the market for the same spaces. “These guys are all bidding for large blocks of space,” he said, “so it might suck for someone like Spotify.”
Silber said that it’s often brokers and landlords who stoke competition between co-working companies. “These guys are really creating that,” he said. “If Spaces looks at a space I’m going to get an email saying, ‘Oh Spaces is really interested in this deal, you guys should look at it’.”
Roordink described how the perception of co-working has changed from the industry’s early days, when many landlords were wary of the business model. “When I started 10 years ago nobody wanted us because they said ‘this is just a hype’,” he told TRD’s David Jeans, the moderator. “What you see now is positive. They will go to us.”
The predictable consequence of all that competition, Stewart said, is higher rents. “In a market that’s hitting $40 (per square foot) gross rents, you’re seeing $56 or $60,” he said. “And we’re scratching our heads and are like, ‘how is that even possible’?”
TRD broke down the co-working industry’s space race in its November issue.