Commercial Giant Still Betting on Coworking Growth

July 15, 2020

While the flexible office space market known as coworking had already started to slow prior to the pandemic, concerns over the spread of germs and related issues leave some housing analysts concerned whether coworking spaces can survive.

But commercial giant JLL is still bullish on the sector. In a new report, The Impact of COVID-19 on Flexible Space, JLL notes that coworking space may be the alternative that companies seek in the post-COVID-19 world to shrink their office footprints for a more flexible option.

“Despite the current distress within the coworking sector, we’re reiterating our position that office space will be fundamentally different in the future, as companies shift away from the long-term leased and owned space to more agile solutions,” Scott Homa, JLL’s senior director of office research, told Commercial Property Executive. “COVID-19 will accelerate a movement toward asset-light workplaces, where work-from-home and remote work blends seamlessly with the corporate office. Even with some coworking operators shrinking their footprints, we still believe 30 percent of office space will be consumed flexibly by 2030.”

The coworking market can include on-demand workspaces, memberships for some locations, short-term flexible spaces, and more traditional spaces with flexible arrangements.

JLL believes that flex-space operators that offer a hybrid model including long-term leases, private office space, and coworking options will be the most likely to weather any downturn. Also, flex-space operators will need to be prepared to adjust their workspaces. Tenants may be drawn to flex spaces as options to serve as smaller satellite offices.

Still, the sector likely will face headwinds. “Owners will have a growing challenge on their hands in the months ahead, as venture-funded coworking companies continue to default on rent payments in some locations,” Homa told Commercial Property Executive. “This will force important decisions among landlords about how to respond and spur continued evolution of the flexible space sector, most notably in the financial structure of deals—fewer long-term leases and more revenue-share/management agreements.”