While the retail industry continues to see an evolving landscape—with the redevelopment of malls and a flood of store closures, as shoppers increasingly move to ecommerce—it isn’t the only commercial real estate segment to do so. In Seattle, where office vacancy is the lowest within the nation’s top 10 downtown markets, the search for affordable office space is starting to look a little like its housing market. “The vacancy rate has dipped to 5.7 percent, down from a high of over 20 percent during the recession and the previous recent low of 8.8 percent a decade ago,” according to a recent article by Mike Rosenberg of the Seattle Times. For a tight market, landlords, investors and owners could take advantage of hard-to-lease spaces: 55% of locations that became coworking spaces were vacant for 6 months before the lease was signed. This presents a viable, valuable solution for even Class B and Class C spaces to attract users that otherwise may not have been tenants: the coworking class.
Coworking has been in Seattle since 2007 (Office Nomads was the first, in Capitol Hill), although it isn’t occupied solely by the gig economy freelancers and entrepreneurs you may expect. WeWork, which has soared to 220,00 members worldwide—more than 31 times that of just four years ago—has corporate clients on its roster, including 22% of that number from the Fortune 500. With office rates remaining as high as ever, it’s no wonder that Seattle today has over 1 million square feet of coworking office space, and 40 coworking locations, according to a study by Yardi Matrix. That’s 1.2% of the urban office market. Suburban coworking options are on the rise, too; over 216K SF of suburban coworking space exists for suburban tenants in Seattle, or 0.6%. Jayson White at Harvard’s Kennedy School of Government discussed suburban workspace opportunity in a 2017 interview:
“One thing I’ve thought about a lot is the business model and the value-proposition, which is substantially larger for high-quality spaces in low-density areas. The value is higher because there are fewer alternatives for entrepreneurially-minded people in a low-density city. In New York, or San Francisco, or Seattle, there are natural congregating areas and business events that cause collisions between creatively-minded people. In a smaller market, those institutions don’t naturally exist, so a small market coworking space or business incubator can provide a value that doesn’t exist any other place, so that’s net added value…Growth is essential for our country’s economic and social success, and growth is happening predominantly in mid-market cities and the suburbs that surround major metros.”
Yardi’s report describes itself as “one of the first to quantify the amount of square footage of coworking space in relation to total office space within markets.” As far as Ironwood could find, it is. Yet as tech companies continue to take up unprecedented footprints within the city proper (such as Amazon, which could occupy up to 12 million square feet by 2022), it won’t be only start-ups and entrepreneurs looking for desks. Small companies too are looking for ways to cut costs, particularly those heavy ones associated with owning real estate. Enter the tenant aggregator, a long-term lease holder so that emerging businesses, and the gig-economy worker, don’t have the same requirement to be bound by. “We provide flexibility, which is particularly crucial for small businesses and entrepreneurial companies,” said Michael Berretta, vice president of North America development for the International Workplace Group (IWG), the company that owns Spaces and Regus. Provided amenities and services, from Wi-Fi, printers, conference rooms, to opportunities to network organically, and the positive reputation and popularity of growing coworking offices such as WeWork amount to a monthly cost that might otherwise be out of reach for such business owners.
Interested in finding a slice of the coworking pie to call your office? Check out this map that Curbed put together of Seattle’s collaborative desk spaces for rent: https://seattle.curbed.com/maps/seattle-office-coworking-business-map.