Seattle is in the midst of a boom in co-working, from giants like WeWork taking every piece of available space to homegrown startups embarking on major expansion. The result: The region now sports the second-fastest growth of so-called “flexible” office space in the U.S., according to a new report.
More than 1 million square of new flex space has come online in the Seattle area in the last year, an annual spike of 67 percent, per a report from real estate giant CBRE. Only Salt Lake City, with 83 percent annual growth, saw a faster increase in the spread of co-working space.
Overall, Seattle has 2.6 million square feet of flex office space as of the end of the second quarter, making it the 10th largest market in the nation. Flex space now makes up roughly 2.4 percent of all office space in the Seattle area, the fifth highest ratio in the U.S.
Companies of all sizes like flexible space right now because of shorter leases that allow them to expand or contract rapidly if needed. WeWork has become one of the biggest office users in the region — the company said earlier this year its portfolio exceeds 1.7 million square feet — at a time when companies big and small want to grow fast but are running into a dearth of available real estate.
“Tightening market conditions in Seattle and Bellevue’s downtown core are complicating expansion plans and making the flexibility of shorter-term leases more attractive to office tenants, especially those seeking large blocks of space,” said Colin Yasukochi, CBRE’s senior director of research and analysis. “This trend will likely continue as tech companies further expand in Puget Sound to take advantage of the high-quality labor pool.”
While WeWork leads the way in square footage among co-working companies in Seattle, it is dealing with some challengers. Spaces, an Amsterdam-based co-working firm, already has two locations in Seattle and recently leased a big chunk of the new 2+U downtown office tower, giving it a total of 169,000 square feet in the city, per CBRE. New York-based Industrious has three locations as well, totaling 80,000 square feet, per CBRE, including one right across the street from Amazon’s signature Spheres.
According to the report, both Spaces and Industrious experienced faster growth in the last 12 months than WeWork did. However, they have much smaller footprints that are nowhere close to WeWork’s presence in the area.
Seattle-based co-working company The Riveter kicked off a national expansion earlier this year, part of its goal to open 100 locations by 2022. The company differentiated itself from other co-working startups by first catering to women entrepreneurs and then moving to an inclusion-focused model.
CBRE points to a sea change in how companies are thinking about real estate as the engine powering the growth of co-working and flexible space. The same way companies like Airbnb and Uber have fostered a culture of sharing homes and cares, WeWork and other co-working companies have ushered in an era of shared office space.
Today, flex space represents only 2 percent of all office inventory nationwide, but CBRE thinks that could change over the next decade. CBRE’s “baseline” scenario predicts flex space will grow to represent 13 percent of all U.S. office inventory by 2030 and could hit 20 percent if landlords decide to convert more traditional offices.
“Traditional landlord-operator lease agreements are giving way to a range of models that change risk and reward dynamics for both parties,” according to the report. “Some landlords are even introducing flex offerings under their own brands. Investors’ support for this new form of real estate income will ensure further growth of the sector.”
Here is the full report from CBRE: