Is the Future of Coworking In The Suburbs and Tertiary Markets?
Recent studies by CBRE, Cushman Wakefield and JLL stated that 80% of all coworking is currently not only concentrated in urban cores but an overwhelming percentage of coworking is also concentrated in only a ½ dozen cities throughout the US.
With most of the office space nationally located in the suburbs, as opposed to urban cores, the logical growth strategy would dictate coworking will start expanding into suburb submarkets.
In fact, there is evidence that it’s already starting to take place. Industrious and SPACES already have locations in suburban markets of Atlanta. WeWork is also scouting suburban markets for opportunities.
In many suburban municipalities coworking is already being promoted through various accelerator and incubator programs created by city and local governments to encourage entrepreneurial business to locate in their municipality with the hope those businesses will grow and add to their tax digest. If history is any indication companies that utilize these types of incubating spaces look for similar facilities upon graduating from these programs.
The creation of mixed-use developments in the suburbs and tertiary markets is also are providing the walkable amenities that have contributed to making coworking so popular in urban areas. At a joint conference between NAIOP and GWA, coworking’s trade association, in the Fall of 2018 a panel discussion lead by a CBRE industry veteran spoke about their recent study indicating millennials, upon having children, overwhelmingly have decided to move out to the suburbs for all the obvious reasons.
Another featured speaker at the conference made the comment the only work environment many millennials have every experienced is coworking, and they will likely demand similar working environments and flexibility in their new communities.
Franchising models like VentureX and Serendipity Labs have hastened the pace for coworking to make inroads into tertiary and suburban markets. Both organizations have made announcements regarding selling franchises in suburban markets like Atlanta as well as second and third tier markets, such as, Raleigh-Durham, Greenville, Charleston, Charlotte and Nashville.
WeWork, SPACES and Industrious have also make several announcements in these southeastern markets, as well, as similar size markets around the country.
For many smaller markets and cities Chamber of Commerce and Economic Development entities are starting to view coworking as a way to promote entrepreneurism and showcase their cities or municipality as forward thinking and on the leading edge of innovation.
As an example, Augusta, with their fast-growing cyber security industry is embracing coworking for that very reason. Margaret Woodward, Augusta’s visionary Executive Director of their Downtown Development Authority states the following about coworking and the benefits of having coworking in Augusta – “The millennial workforce is returning to the city center in Downtown Augusta at a rapid pace. We are excited to have coworking options in the heart of downtown as well to foster the entrepreneurial spirit of these millennials and cyber related workforce.”
As coworking makes its way into the suburbs and tertiary markets there will be differences in the coworking of today and tomorrow. Footprints for many coworking models could be smaller and there will likely be more partnerships between coworking operators and building owners.
Although overall footprints for coworking spaces may be smaller than their urban counterparts’ sizes of suites with coworking may increase. Activity for larger suites, 15 plus desks, has been trending up for the past twelve to eighteen months.
Reasons for this increased activity could be a combination of corporate American coming to the realization to attract and keep the best workers more creative and collaborative space is being required by the global force, as well as, the upcoming accounting changes whereby any lease over twelve months will be required to be on a company’s balance sheet as opposed to their profit and loss statement.
As in the movie, Field of Dreams, “Build It and They Will Come”, may not be a bad approach for creating coworking environments in the suburbs and secondary markets.
Atlanta Investment Properties