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The Future of Coworking and Flexible Office Space: Five Potential Paths

This white paper examines the rapid growth of coworking and flexible office space over the past several years and lays out five possible scenarios for how the sector will evolve during the next five years. Key findings of the report include:

  • During the past two years, the office space occupied by coworking and flexible office space providers has grown significantly, more than doubling its inventory in many major markets. Based on the 24 metros studied for this analysis, coworking currently occupies 49.7 million square feet of office space, or 1.4% of inventory in these large U.S. metro areas.
  • There are at least five potential paths the coworking and flexible office segment of the U.S. office market could take over the next few years based on its recent growth trends, the paths other industries have taken under similar circumstances, and current changes the industry is undergoing. The range of outcomes includes these five scenarios:
    • Scenario 1 Coworking growth accelerates rapidly, reaching 20% of inventory by 2023.
    • Scenario 2 Coworking continues at or near its current pace of growth but with consolidation within the industry.
    • Scenario 3 Coworking’s rate of growth slows considerably to 5% per year. Large players remain a force but find the market is saturated and end ambitious growth plans.
    • Scenario 4 Coworking is challenged during the next economic downturn and undergoes significant consolidation. Current coworking occupancy is reduced by 10%.
    • Scenario 5 Coworking is completely disrupted during the next economic downturn. Current coworking occupancy is reduced by half.
  • Our prediction for the future of coworking and flexible office space most closely aligns with Scenario 2. We expect that coworking will continue to expand near its remarkable recent rate of growth, but that as the industry matures, larger players will aim to expand market share by acquiring smaller players, resulting in moderate consolidation within the industry. As with other industries, the rate of growth will decelerate as the market matures.

For each scenario, we explore how much space coworking providers will occupy, what types of tenants use coworking in that future, and how the changes will impact asset owners and tenants. We end each section with action steps based on that future coming to fruition. The study also includes data on coworking occupancy in 24 large metro areas and details how each would be impacted in each of these five scenarios.