Global law firm Ropes & Gray recently released a report on the flexible workspace industry – Coworking: A Real Estate Revolution.  They surveyed 100 senior real estate executives across the industry and reported that 100% of respondents said they have seen a moderate to significant increase in the proportion of startups using coworking in the past three years, with 92% saying the same about self-employed individuals and 73% saying the same about large companies. Moreover, more than half of those surveyed said they believe coworking will continue to absorb traditional office space market share in their region over the next three years.

 

 “Technology has made off-site working both possible and practical, improving work-life balance for employees and reducing costs for companies of all sizes,” the report states. “At the same time, the current low-growth economic environment is putting pressure on companies to increase productivity, as well as attract and retain talent. All of this is driving a coworking trend that is redefining the real estate sector.”

 

As coworking spaces have become a viable alternative to traditional, long-term leases, employers are more and more frequently taking advantage of these shorter-term options. In fact, CBRE’s America’s Occupier Survey 2018 notes that nearly half (44%) of all corporations are already using some type of flexible office solution.

 

What does this actually mean for the future of the real estate industry? The Ropes & Gray report suggests that in addition to disrupting traditional office space, coworking operators are also beginning to shift into other asset classes by partnering with hotel companies, luxury fitness operators and residential operators.

 

 “At the same time,” the report explains, “equity investors […] anticipate membership growth among both large and small coworking operators. There are also hints that a shift is underway among those turning to coworking as a viable option. Freelancers, creatives and technology firms may soon be battling larger companies, which are looking for more flexibility in their office needs, for shared spaces. Typical office spaces are responding in kind, with an overwhelming majority in our survey saying that landlords have begun to adopt ‘real estate as a service’ innovations in their otherwise traditional office settings.”

 

This indicates that coworking providers will increasingly enter into management and partnership agreements with landlords rather than engage in traditional leases, as Industrious has already done.

 

Perhaps one of the most interesting findings from the Ropes & Gray survey is that those embracing the coworking revolution are likely decreasing their vulnerability as tenants as compared to those leasing traditional office real estate. In fact, 73% of those surveyed believe an economic downturn would have a positive effect on the coworking sector, and 61% of lenders say the coworking model is less vulnerable to the effects of a downturn than traditional office real estate, in part because a downturn would likely give rise to self-employment, which would increase the demand for flexible workplace options.

 

If you’re interested in learning more about workplace experiences that help teams of all sizes and stages thrive — with the flexibility to scale on their own terms — check available options at Industrious.