Whatever might happen to coworking colossus WeWork—given the late September ouster of its founder, who was also chief executive of its parent company—the sector seems likely to remain a presence in the Boston area for a long time.
The region is the fourth largest coworking market in the United States, with some 3.7 million commercial square feet turned over to flex space. That places the region ahead of every market except Manhattan (with 15 million square feet), Los Angeles (5.4 million), and Chicago (3.8 million).
That is according to a recent report from commercial brokerage CBRE, which tracked coworking/flex space growth from the second quarter of 2018 to the second quarter of 2019. The numbers for Boston were striking.
The sector as a share of the region’s office market increased 0.4 percent, to 1.7 percent. That 0.4 percent represented 847,000 square feet. The share was basically zero percent in 2010, and 1.2 percent as recently as 2017.
What’s more, Boston’s 1.7 percent still lags the national average of 1.8 percent, according to CBRE, and is well below the coworking shares seen in San Francisco (4 percent) and Manhattan (3.6 percent) never mind overseas markets such as Shanghai and London. That suggests room for growth.
So does what’s happened in the past 12 months. WeWork, for one, increased its Boston-area footprint more than 90 percent, to 1.511 million square feet. The growth included a 250,000-square-foot deal at the State Street tower at One Lincoln Street, enough for some 4,000 desks. The operator also took 117,000 square feet at 100 Summer Street for 2,300 desks and all of the 29,000 square feet of office space at One Milk Street (pictured above), enough for 440 desks, among other large leases over the past 12 months.
Industrious, another Manhattan-based coworking operator, also grew significantly in the Boston area over the past year. Its share increased more than 76 percent, to 112,000 square feet, much of it in Back Bay, according to CBRE. Regus, a decades-old flex-space operator, is the region’s second largest one, however, with 364,000 square feet.
The Boston region’s tech industry and culture is driving the rise of coworking. Startups and individuals apparently like the more flexible lease terms and the accoutrements such as coffee and communal space that coworking spaces provide.
“The 10 largest flex-office markets that are also top tech markets continue to increase their share of flexible office space faster than others,” the CBRE report said.
CBRE and other analysts expect the growth to continue come what may with WeWork and with the economy at large. If anything, the very nature of coworking’s flexibility will help it weather a recession better than most commercial landlords. Analysts say that while the coworking market might contract, the sector will still be more attractive to companies that might be warier during a downturn of signing longer-term leases.
Besides, the coworking/flex space model just seems to fit in some cities and metro regions, like Boston, more than others.
“If you read the criticisms of WeWork a few years ago, it was that this was just a trend, a flash in the pan charging for offices near the ping-pong table,” Industrious CEO Jamie Hodari told Curbed in September. “There’s little to no skepticism about demand for this product category. It’s here to stay.”