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Why Commercial Real Estate Investors Are Betting On Shared Office Spaces


Kenny Kane is the Chief Operating Officer at Firmspace.

Shared office spaces aren’t a fad; they’re the future. Just look at some recent growth projections for the space: 19.7% CAGR for 2022 and 17.8% through 2026. And the growth won’t all happen in traditional business districts. In early March, for example, a startup bringing shared offices to the suburbs closed a $9.6 million seed round.

For those who have been following the space, these developments aren’t surprising, especially given the current sentiment about returning to the office: Just 3% of office workers want to go in five days per week, according to a Fortune article.

For employers, shared offices are an obvious way to provide a central hub without paying for a lot of space that sits empty. For real estate investors, the challenge is to identify which types of shared office spaces are best positioned to meet companies’ needs moving forward. Here are some key indicators that are pointing the way.

A staggering 69 million people quit their jobs last year, and as many as one in five did so because of work-life balance issues, including the ability to work remotely at least some of the time. In fact, the Fortune article states that 86% of “white-collar” workers want to work from home at least two days per week.

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And because the U.S. is now officially at full employment, employers have to accommodate those preferences — or risk losing talent to those who do.

This is one reason investors are so bullish on shared office spaces: they make it possible for companies to recapture the benefits of in-person work (like the much-mourned impromptu collaboration) without forcing a full-time return to the office (and risking an exodus of talent).

It’s key to note, though, that not just any shared space will do. Quality matters.

Privacy, Security, Health

While most workers don’t want to return to offices full time, many see an advantage in hybrid work; that is, a week split between the office and the home. Parents of young children, for example, might find the office a welcome haven. And those whose work involves deep focus or sensitive conversations might prefer a soundproof space with a closeable door.

Then there’s the question of security. Eighty percent of IT leaders (registration required) agree that their organizations are more exposed to cyberattacks because of remote work. The first year of the pandemic bore that out. In 2020, remote desktop protocol (RDP) attacks surged 768%.

Another key concern is health. Any space bosses ask their workers to come to must have good ventilation (no more recirculated air), rigorous cleaning protocols and clearly stated policies (that follow CDC guidelines) for if and when Covid-19 surges again.

To be competitive, shared offices must deliver on all three fronts: privacy, security and health. And that, as I’ve mentioned in the past, is the baseline. The spaces most likely to attract businesses — and investors — offer more.

Flexibility

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Flexibility is one of the biggest benefits shared offices can offer tenants. The guarantee of dedicated private space plus access to additional amenities as needed (conference rooms, communal areas, even podcast or video recording rooms) is something it’s much harder to get from traditional office leases.

And it’s not just the space itself that can deliver on flexibility; the brand can as well. As travel opens back up, “nomads” may seek to work from places other than their home base. The most desirable office spaces will have locations in multiple cities where people want to be and will offer transferable memberships or the option to reserve space for a single day or week.

Hotels like Accor and Hoxton offer shared workspaces for this very reason. And while those two focus on high-end spaces in international markets, the most compelling offerings domestically will not necessarily be defined by luxury.

Premium But Not Luxury

That’s not to say that quality is becoming any less important. But what will stand out to tenants looking for a long-term hybrid work solution is less the high-end touches (brand-name bottled water, rooftop pool) and more the everyday value-adds.

Think childcare (explicitly woven into the company’s offering, for example), wellness amenities and a front-desk employee who can greet and direct clients and prospective employees. These types of benefits elevate the office to a place that offers more than a quiet desk, which can motivate employees to come in and collaborate.

The Future Of Offices: Smaller, Better Footprints

Work has changed in the past two years. Today, employers are willing to pay more for better spaces. This is in part because many are opting for less real estate overall and in part because they’re finding that’s what it takes to bring their employees back in person.

Those that can deliver an experience that beats the home office (with safe, quiet, productivity-enhancing spaces) will be best positioned to attract and retain top talent, meaning they’ll be likely to grow their square footage over time.

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