The rise of shared workspaces has been disrupting commercial real estate (CRE) for a decade now. Borne out of the ever-increasing cost of CRE and the parallel rise of millennial entrepreneurs, sharing an office has proven to be a cost-effective alternative for start-ups to get businesses rolling.
Office sharing has been on the rise since it was developed 10 years ago by WeWork in New York. WeWork now has 758 “open and coming soon” physical locations in 124 cities. Earlier in 2017, it became a unicorn, an elite group of start-ups that are valued at least $1 billion. Deloitte’s 2019 Commercial Real Estate Outlook noted that “the company’s growth outstrips many traditional CRE companies.”
New York and the Rest of the World
It should come as no surprise that New York City, where the land is scarce, has become a co-working powerhouse. Collier’s 2019 U.S. Flexible Workspace Outlook report notes that the New York market alone represents about 40 percent of the total flexible office space market in the country followed by San Francisco, the Silicon Valley region, Austin and Boston. Additionally, Manhattan accounted for 18 percent of market leasing activity in 2018 and is projected to grow by 25 percent per year at retail properties through 2023.
WeWork’s rival, China’s UCommune, has been playing catch-up on this new industry’s potential. The company launched in downtown Manhattan last year and has started setting up in Los Angeles and London. Also a unicorn, UCommune was valued at $1.8 billion in 2018, and Bloomberg reported recently that UCommune is gearing up to go public in 2020 in the U.S. for $200 million.
Harnessing Millennial Growth
Shared workspaces have started to become the new normal, and millennials are driving the industry’s growth, with countless start-ups popping up every day. “The live-work-play office theme is well documented in the New York real estate industry,” said Derrick Do, SVP – Eastern Region Director of Commercial Real Estate at East West Bank. “The opportunity to work in a creative, tech or start-up company appeals highly to millennials.”
“Soon, millennials will become the largest generation in the U.S. labor force and we’re expecting that more companies will have a ‘flexible’ workspace in order to lure talent,” added Do.
CRE Now and Beyond
As promising as it looks, office demand remains primarily tied to the health of the economy—namely, employment. In any case, getting in on this burgeoning industry requires a partner with proven experience in commercial real estate.
“With East West Bank’s national platform, disciplined risk management approach, and track record in both traditional and out-of-the box lending, we would remain in the prime position to support our clients’ growth in various economic cycles,” said Do. “We have the capacity to follow our clients in different geographical and cross-border markets. When unexpected challenges arise and when tough times hit, the Bank can direct clients to the right solutions.”
Moreover, East West Bank is a top-performing bank that has extensive experience in construction, bridge and mini-permanent financing for commercial properties, with an exclusive focus on the U.S. and Greater China markets. As of June 30, 2019, the bank has a record loan portfolio of $33.7 billion, with 38 percent in commercial real estate debt throughout the country. The New York region is the second largest commercial property market for East West Bank after California.
Derrick Do leads the commercial real estate portfolio and drives new business development for East West Bank’s Greater New York market. With $42.9 billion in assets and a market capitalization of approximately $7 billion, East West Bank (NASDAQ: EWBC) is one of the 30 largest public banks in the U.S. Mr. Do is well-versed in the commercial real estate industry with over 15 years of proven track record in commercial lending, portfolio management and underwriting. For more information about East West Bank’s commercial real estate lending program, please contact Derrick Do at 212-298-3816 or [email protected]