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The Evolution of Coworking in Mid-Sized Markets

At a national level, the market share of coworking and flexible office solutions is expanding rapidly. Is that the case in America’s mid-sized markets? What can asset owners and coworking operators do to take advantage of changes in these markets?

What Are the Implications for Our Clients?

LaunchHouse’s Goldstein maintains that there are two main coworking lessons for the Midwest based on its experience thus far. First, coworking operators should temper their expectations when it comes to overall membership numbers, given market size. Second, they should expand their marketing to reach surrounding suburbs and rural areas, which may attract customers who are willing to drive to their coworking space. In fact, operators should consider monitoring the business goals of suburban municipalities’ economic development departments, which have increasingly begun promoting coworking through entrepreneurial incentives as well as accelerator and incubator programs. Mixed-use developments in the suburbs also have created opportunities for coworking entities to gain traction in walkable and amenity-rich neighborhoods.

Some of Cleveland’s large corporations are establishing satellite locations in traditional office settings as they test flexible space and their research and development models. These companies also are expressing interest in coworking, which is encouraging traditional office asset owners to improve their amenities as a way to compete. Some of those asset owners also are developing their own flexible space programs. Tenants have spoken with their dollars that reduced overhead and flexible lease terms are important, and the market is responding in a variety of ways. Smaller markets may not have the population density of the gateway cities, but demand exists for flexible space. A similar transformation is occurring as in those gateway markets, albeit on a smaller scale. Nimble asset owners can take advantage of this evolution by arranging management agreements with coworking operators or creating their own in-house flexible space solutions.

About the authors

Matthew Orgovan is the Research and Marketing Manager in Newmark Knight Frank’s Cleveland office.

Nate Hoover is the Research Coordinator in Newmark Knight Frank’s Cleveland office.

 

Camille Norton is an Associate in Newmark Knight Frank’s Cleveland office.

For more information

Alexander (Sandy) Paul, Senior Managing Director of National Research, APaul@ngkf.com