Atlanta Co-Working Boom Puts Pressure On Traditional Office Leases
Want to get a jump-start on upcoming deals? Meet the major Atlanta players at one of our upcoming events!
Atlanta has become one of the top five markets in the U.S. for co-working. As the number of tech companies and startups in the city grows, co-working companies have acquired properties in Atlanta’s urban core and surrounding suburbs.
The increasing availability of co-working spaces has strained the traditional office market. The proportion of U.S. co-working members who have moved from traditional offices to co-working rose from 23% in 2014 to 37% in 2016. While Atlanta office net absorption was positive, rising from 345K SF in Q3 to 906K SF in Q4, according to Colliers, the data does not account for the percentage of office leases made by co-working companies.
Beyond the numbers, Atlanta owners have to compete with highly amenitized, modern workspaces that offer the flexibility that young, high-growth businesses demand.
Several national co-working providers have grown exponentially in Atlanta. Earlier this month, New York-based Serendipity Labs signed a franchise agreement to launch 17 co-working locations in Atlanta, Charleston and Greenville. Serendipity Labs secured its first Atlanta location at Three Alliance Center in late 2017. The announcement follows the opening of WeWork’s second Buckhead location this month, adding to its existing three locations. Increased co-working space will be able to accommodate high-growth companies for longer leases.
Co-working is on the rise in the suburban office market. Industrious announced its first suburban co-working space in November, a 28K SF lease at 7000 Central Park in Sandy Springs. The office is designed to house up to 200 members, and is a centralized location for many of Industrious' clients, allowing some to work closer to home. The increased footprint allows Industrious to offer larger floor plates or multi-floor leases to the bigger tenants that traditional offices once monopolized.
While co-working continues to grow in popularity, traditional offices can still compete for tenants by taking design inspiration from their competition. Companies like Serendipity have built a brand around the use of glass walls to divide offices and provide access to natural light. This design element allows traditional offices to create spaces that emphasize employee wellness and comfort.
Design upgrades can have a positive impact on leasing capability. In a co-working environment, companies request a bigger office when headcounts exceed the number of desks. This is not as feasible when companies are bound to a multiyear lease or have an office in a fully occupied building. Movable walls and modular furniture offer a solution by helping occupiers design adaptable spaces. Businesses can grow without relocating to a new building.
Reliable digital connectivity should be a cornerstone of any modern office. Smaller devices and more powerful wireless technology have untethered workers from their desks. Many co-working spaces advertise a seamless connectivity experience, allowing employees to move between the office, conference rooms, phone booths and lounge spaces without a dropped connection. Employees can work in the ways that make them the most productive, without worrying that they will interrupt a teleconference or disrupt a data sync.
"Whether you see co-working encroaching on your tenant base or you are looking to secure a multifloor lease with a co-working location at your property, creating a seamless and reliable digital environment should be a strategic priority for Atlanta CRE in 2018," WiredScore Head of Atlanta JD Jeske said.
Wired Certification, a rating system developed by WiredScore, acts as a benchmark for assessing connectivity in traditional offices. Office properties can use this platform to stand out in the market by signaling to startups, tech companies and co-working providers searching for their next Atlanta location that they are prepared to handle the demands of a digital economy.
Co-working will continue to gain market share in Atlanta, as the city continues to draw young talent. For traditional office space, it is survival of the best connected.
To learn more about this Bisnow content partner, click here.