At the cusp of WeWork's initial public offering, investors now have to decide whether the coworking industry has a long growth runway ahead, or whether the market for shared office space is reaching saturation.

There is no consensus on that point yet, but there is some concern about the proliferation of coworking space. The vast majority — 87% — of survey participants in Real Capital Markets' 2019 Office Investor Sentiment Report see coworking as a "moderate to high-risk investment."

One reason: market saturation. More than a third of the respondents who see coworking as a moderate or high-risk play also said the market could be saturated.

In a saturated market, an economic downturn has the potential to empty out a lot of coworking space, and thus leave landlords holding the bag when coworking operations in their buildings close under the pressure.

Owners are trying to mitigate the risk. Speakers at Bisnow's recent Atlanta State of the Market event said office landlords are attempting to limit the number of square feet coworking operators lease in a single building. Any more than 20% to 30% of the total square footage can make an office building's value take a hit in the eyes of investors, Seven Oaks Co. CEO Bob Voyles said.

Other observers of the market assert that coworking has a lot of room for growth left. The top 10 U.S. markets account for more than 70% of the nation’s flexible-office inventory, with 25% in Manhattan alone, according to a recent CBRE report on coworking.

"With nearly 4B SF of traditional office space in the 54 major metros tracked by CBRE, continued growth of flexible space is inevitable even under conservative estimates," the report said.

“I think the bottom line is that the concept is not going away,” Newmark Knight Frank Director of Research Bethany Schneider told Commercial Observer. “It’s really changed the landscape in a way that’s not going to be undone at this point.”

As shared-space providers serve more large clients, they need to build a  network for those that are national or global in nature, Cushman & Wakefield Americas Head of Occupier Research David Smith told Commercial Observer.

Thus coworking operators are moving into secondary cities, expecting that larger companies will want more coworking space beyond the major coastal markets. In April, for example, WeWork announced it will develop a 200K SF, ground-up WeWork in the heart of Downtown Bentonville, Arkansas, which is neither gateway nor coastal, but hometown of retail behemoth Walmart.

WeWork is certainly betting on more growth. For its initial public offering to succeed, the company needs to persuade investors there is still room for the coworking model to grow everywhere — in established markets like coastal gateways, in secondary markets and in global markets. Competing coworking brands face the same challenge.

"We believe that we have laid the foundation to capitalize on our significant market opportunity by continuing to reinvent the future of work," WeWork said in its IPO prospectus released Aug. 14.

WeWork offered generic growth goals instead of much detail on how the company would capitalize on market opportunity, however. According to the prospectus, the company intends to grow by expanding in new and existing markets, enhancing product and service offerings, developing and strengthening relationships with enterprise members, lowering upfront capital costs and improving operational efficiency, and investing in technology.