Creative Co-Working Has Grown By 200% Every Year Since 2011
Co-working providers have grown to increasing prominence in the commercial real estate industry, especially as WeWork's valuations continue to skyrocket (most recently valued at $2B more than Anbang's latest offer to beat Marriott in the Starwood bidding war). But now researchers are calling for the co-working space to absolutely explode over the next five years.
According to JLL research data released exclusively to Bisnow, the co-working sector makes up about 1.8M SF of leased office space in the DC metropolitan area. By 2021, assuming the size of the overall regional workforce is unchanged but the rise of the freelance economy maintains its trajectory, the co-working footprint is expected to grow to 13.5M SF.
Compare that with a CBRE study from last year that expects law firms—one of the most crucial sectors of DC office leasing—to lease 6M SF in the same time period.
Crucially, creative co-working spaces like WeWork and MakeOffices (née UberOffices), along with incubators like 1776, have grown by 195% annually over the last five years, and at the rates they are filling up—plus the increasingly independent modern economy—that is where the majority of growth will come.
JLL senior VP Scott Homa, the firm's director of Mid-Atlantic research, says he reached his conclusions partly based on the Bureau of Labor Statistics' projection that freelancers, temps and entrepreneurs will grow from 30% of today's workforce to 40% by 2021.
"The composition of the Metro DC economy is changing in a way that no single entity or handful of large users are driving massive change similar to the effect Amazon is having in Seattle," Scott tells Bisnow. "It’s small media groups, small tech startups, these freelancers who would otherwise work from home or in coffee shops, now creating the early stages of material growth in the office market."
Already, upstart co-working space is graduating from small sections of offices to multiple floors in downtown businesses. According to JLL, 12 of 14 new creative co-working office leases in DC signed in 2015 were in blocks greater than 20k SF.
WeWork's planned 120k SF location at 655 16th St NW, which Bisnow first reported last month, will be the biggest co-working lease in the region, ahead of its 83k SF Dupont Circle location and the handful of locations it and MakeOffices has in the 30k to 40k SF range.
"There's a strategy behind the economies of scale that can be created through larger co-working environments," Scott says. "We have seen a progression in terms of the average lease size. That will likely continue."
It’s also not just startups and freelancers that are jumping on the co-working bandwagon. Several Fortune 500 companies are now leasing space in some co-working spots.
“In some cases for global corporations, the relative ease of using an established co-working provider can be more efficient and practical than opening a stand-alone office,” Scott says. “It also allows for the sort of ‘creative collisions’ and other interactions with the startup community that are inherent in the co-working world.”