1Photo courtesy of Greystar
THE FUTURE OF COWORKING AND FLEXIBLE OFFICE SPACE: FIVE POTENTIAL PATHS JANUARY 23, 2019
PREPARED FOR: NAIOPPRESENTED BY:ALEXANDER (SANDY) PAUL, CRE, LAI SENIOR MANAGING DIRECTOR, NATIONAL RESEARCH
2
RAPID GROWTH OF COWORKING IN LARGE METRO AREASSHARE OF OFFICE INVENTORY LEASED BY COWORKING FIRMS: 2016 VS. 2018
Source: NKF Research; January 2019
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0% 2016 Share of Office Inventory 2018 Share of Office Inventory
SH
AR
EO
F
OF
FI
CE
I
NV
EN
TO
RY
L
EA
SE
D
BY
C
OW
OR
KI
NG
F
IR
MS
3
RAPID GROWTH OF COWORKING IN LARGE METRO AREASOFFICE INVENTORY LEASED BY COWORKING FIRMS: 2016 VS. 2018
Source: NKF Research; January 2019
20.0
5.5
37.7
12.1
0
5
10
15
20
25
30
35
40
Primary Markets Secondary Markets
2016 Coworking SF Occupied 2018 Coworking SF Occupied
MI
LL
IO
NS
O
F
SQ
UA
RE
F
EE
T
2016-2018 growth rate:
88%
2016-2018 growth
rate: 120%
24 major markets in NKF study = 95%
growth rate
4
SH
AR
E
OF
O
FF
IC
E
IN
VE
NT
OR
Y
LE
AS
ED
B
Y
CO
WO
RK
IN
G
FI
RM
S
0.6%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
NY LA SF Bos Hou Dal Atl Mia Chi Phi Was Phx
Source: NKF Research; January 2019
WASHINGTON’S ADOPTION OF COWORKING LAGS OTHER PRIMARY MARKETS SHARE OF OFFICE INVENTORY LEASED BY COWORKING FIRMS: 2018
5
WHY DOES WASHINGTON LAG IN COWORKING GROWTH?
Source: boardmember.com, NKF Research; January 2019
The District’s two largest tenant types have not yet fully embraced the trend
6
COWORKING BOLSTERING DEMAND IN THE DISTRICT AS LAW FIRMS PULL BACKDISTRICT OF COLUMBIA OFFICE NET ABSORPTION BY SECTOR2015 - 2019
Source: NKF Research; January 2019
SQ
UA
RE
F
EE
T
OF
NE
T
AB
SO
RP
TI
ON
(
MI
LL
IO
NS
)
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
2015 2016 2017 2018 2019 Proj.
Coworking Net Absorption Law Firms Net Absorption Remainder of Market
?
7Source: CoStar, NKF Research; January 2019
3.4
16.5
0
2
4
6
8
10
12
14
16
18
Spec Suites To-Be-Customized Space
AV
ER
AG
E
MO
NT
HS
O
N
MA
RK
ET
SPEC SUITES HELP ILLUSTRATE THE POPULARITY OF COWORKING TIME ON MARKET COMPARISON: SPEC SUITES VS. TO-BE-CUSTOMIZED SPACEDISTRICT OF COLUMBIA OFFICE SPACES 7,500 SF AND SMALLER | 2015 - 2018
8Source: NKF Research; January 2019
7.037.02
6.88
6.85
6.75
6.80
6.85
6.90
6.95
7.00
7.05
2015 2016 2017 2018
AV
ER
AG
E
LE
AS
E
TE
RM
(
YE
AR
S)
LEASE TERMS GETTING SHORTERAVERAGE LEASE TERM WASHINGTON METRO AREA | 2015 - 2018
Tenants want greater flexibility in lease terms.
Owners of traditional space are following coworking providers in meeting those needs.
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New formats and leasing unconventional space
RECENT DEVELOPMENTS IN COWORKING AND FLEXIBLE OFFICE SPACE
Source: NKF Research; January 2019
Asset owners offering their own coworking spaces or concepts
Asset owners acquiring existing coworking companies
Brokerage firms entering the market
Management agreements
10
ACTIVE PLAYERS IN WASHINGTON’S COWORKING MARKET
Source: NKF Research; January 2019
Space+ coworking/spec suite concept
Zo amenities and services suite
Management agreement with Industrious
“Town Hall” concept and investment in MakeOffices
Major Coworking Operators Major Owners with Coworking Operators as Tenants
11
THE FUTURE OF COWORKING AND FLEXIBLE OFFICE SPACEFIVE SCENARIOS FOR THE NEXT FIVE YEARS
Source: NKF Research; January 2019
12
COWORKING IN WASHINGTONHOW DO THE FIVE SCENARIOS PLAY OUT IN WASHINGTON?
Source: NKF Research; January 2019
P E R C E N T O F O F F I C E I N V E N T O R Y O C C U P I E D B Y C O W O R K I N G B Y 2 0 2 3
0.3%
0.5%
0.8%
4.2%
20.0%
0.6%
0% 4% 8% 12% 16% 20%
Scenario 5
Scenario 4
Scenario 3
Scenario 2
Scenario 1
As of 2018
13Photo courtesy of Greystar
THE FUTURE OF COWORKING AND FLEXIBLE OFFICE SPACE: FIVE POTENTIAL PATHS JANUARY 23, 2019
PREPARED FOR: NAIOPPRESENTED BY:ALEXANDER (SANDY) PAUL, CRE, LAI SENIOR MANAGING DIRECTOR, NATIONAL RESEARCH
