Are Shared Spaces Changing Real Estate As We Know It?

Since WeWork first opened its doors in 2010, the shared office space concept has altered the conventional workspace dynamic for companies all over the world—regardless of whether they are an occupant of one of its spaces or not. The WeWork model challenges traditional commercial real estate norms by offering offices and unique workspaces of all sizes to companies that aren’t looking to invest in space in a full-floor office building. And while the company has fallen on hard times since its initial inception, most notably through a since-shelved IPO in late 2019, the disruption it continues to cause in the real estate space has changed the industry forevermore.

To someone like my parents, the concept WeWork popularized seems ridiculous; a place where you share an office with hundreds of other companies with which you interact on a daily basis to seems chaotic and unproductive. According to Quartz, 40% of WeWork members work for companies of over 500 people. These companies use WeWork as an annex for employees that are freelance or don’t have a specific reason to be in the office every day, a practice becoming more and more popular throughout large-scale companies. But what effect do coworking spaces have on commercial real estate?

As was detailed by The Startup, commercial landlords previously enjoyed steady, long-term revenue and predictable returns under the traditional long-term leases held by their tenants, but the rise in remote employment—and as a result, the emergence of coworking spaces—the way those leases are structured and who’s signing them has changed drastically.

“Thanks to the decoupling of work and location in recent years, the flexible workspace industry is booming,” the article reads. “Coworking is ripping up the old playbook of real estate being a defensive asset class. Instead, with the brand premium aspect coworking adds, it’s becoming something more fluid. The number of coworking venues has grown by 240% globally over the past three years, and around two-thirds of current coworking spaces anticipate expansion—of 70% of their area on average—and one-third plan to open at least one more location.”

As the trend toward remote employment continues, shorter-term and more flexible leases, as well as building customization, are likely to define the future of office real estate. This gives landlords the opportunity to lease spaces in more lucrative ways in addition to being able to offer smaller businesses spaces that would otherwise go unused. These shorter leases also give flexibility to the tenant to move around and grow in the coworking space, all of which indicate changes that may very well be the be ignition real estate needs to change for the better.