Coworking Operators Are Adding Locations, Raising Rents As Market Stabilizes

WeWork Met Square
Bisnow/Jon Banister
A Wework Coworking Space In Washington, D.c.

As more and more workers return to the workplace, the U.S. coworking and flexible office industry stabilized this fall, with rents on the rise and more locations opening than closing for the first time since the coronavirus pandemic began, according to a new report.

Asking rents at coworking and flexible offices rose 2.5% nationwide between July and September, according to a report this week by flexible office firm Upsuite, while 24 new locations opened across the country and 21 existing ones shuttered.

But as the market appeared to reach an equilibrium, total views on Upsuite’s listings went down 25% quarter-over-quarter, the firm said, which it attributed to seasonality and fears around the delta variant late in the summer. Interest and inquiries had surged in Q2.

This could mean that transaction activity, which increased this quarter, will level out in the final quarter of the year, Upsuite founder and CEO Ben Wright told Bisnow in an interview Wednesday.

“It was a very positive quarter for the underlying kind of fundamentals and the dollars and cents in the business. I'm not expecting a blockbuster Q4, like, ‘Whoa, not only is it back, but it's revolutionizing everything.’ It's just getting back on track,” he said. “That is what's remarkable about it — that there's elements of normalcy here.”

The number of new locations outpacing the total number of closures is the most significant development of the past three months, Wright said, because it means that the market has recalibrated and indicates the worst may be over. While transactions views could indicate that transactions may remain constant next quarter, the industry isn’t likely to experience the volatility it has amid the pandemic, Wright said.

“The fundamentals of the industry are improving,” he said. “We think we're going to start to see a lot of new locations in Q4, and then into 2022.”

The rebound of the industry has been uneven across the country; Atlanta experienced a demand surge in the last quarter, and coworking space in Midtown, the city's booming tech hub, is near capacity, according to Upsuite. At the same time, rents and activity decreased in Los Angeles — the nation's second-largest coworking market — while vacancy increased and more locations closed than opened.

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