Since 2020, four of the top five coworking providers in Los Angeles have returned 1 million square feet of space to the market, according to Raise Commercial Real Estate.
The brokerage found that coworking accounts for about 5 million square feet, or 2.2%, of total Los Angeles office inventory.
“Even at the height of coworking, and yes, some of them grew very quickly, overall they really weren’t really more than 3% of the total office inventory in LA,” said Petra Durnin. , head of market analysis at Raise.
Despite the return of some coworking spaces, experts agree that the remaining spaces are attracting increased interest from companies looking for flexibility and that some operators are starting to open new premises.
“Inventory is down significantly,” said John Eichler, director of Avison Young Inc., adding that “those left are doing better than before Covid.”
“I don’t believe there has been any material change post Covid away from renting and coworking. But in the early parts of the pandemic, in 2020, especially the first six months, many companies canceled traditional long-term leases and put them on hold or temporarily went into coworking. But since that happened, companies have either decided “we’re going to a virtual model” or re-committed to reducing their footprint. »
David Smith, the global head of occupant research at Cushman & Wakefield Inc., said some companies had “adjusted” their portfolios in the pandemic with the “closure of underperforming sites”.
The occupancy of pitches still open, he said, is strong.
“We saw a pause in demand at the start of the pandemic. What has happened is that demand has started to pick up and we are seeing that in the market. There has been a significant move towards enterprise customers, which are larger occupiers currently using flexible office as a solution. It can be for overflow space or for people to drop into a city that doesn’t come into an office every day,” Smith said.
“Demand has grown at a faster rate than demand for traditional offices,” he added.
Chris Penrose, senior vice president of CBRE Group Inc., said demand for office space, particularly coworking space, has increased significantly over the past 45 days.
“Companies are realizing that they need some kind of landing space, some kind of meeting place and that’s (coworking) the most convenient and the path of least resistance,” Penrose said. He added that it was seen as an easy option because there is no construction time and cost, you can occupy quickly and there are no long-term lease negotiations or payment commitments. long term lease.
“Coworking is an easy way to plant a flag and grow a footprint with maximum flexibility,” Penrose said.
Private office space
WeWork Cos. Inc. returned office space in Los Angeles during the pandemic, but also worked to expand its WeWork Growth Campus program, pledging $35 million to the program in March.
It was first launched in the United States in New York in February, providing space and support for startups and nonprofits. It has since added locations in cities like Los Angeles at 222 Pacific Coast Highway and 1601 Vine St.
Chris Ferzli, global head of public affairs at WeWork, said the program allows tech startups that are in the same space to network and grow together. The program will have 160 private offices for businesses in Los Angeles
Los Angeles, she said, is the “home base” for many businesses.
WeWork hopes to expand the program to more locations in Los Angeles
Ferzli said WeWork is working on all of its locations to “optimize and refine them and deliver amenities” that are attractive to today’s tenants.
Private office spaces within coworking spaces, experts agree, are becoming increasingly popular.
“Most of the post-pandemic demand over the past year has been more for dedicated desks (in coworking spaces), companies that have 50 employees and need somewhere to sit “Smith said.
Eichler added that concepts like Regus, which is owned by IWG and has private offices, “have weathered the storm better” than some other coworking operators.
To come up
Experts expect coworking to be in high demand in the future.
“For the foreseeable future, coworking will be in high demand,” Penrose said. “It wouldn’t surprise me if companies looking to move their offices in their specific market want to move closer to a floor or coworking space to help with flexibility for growth, as there are still plenty of uncertainty about what the future of office space will look like.”
He added that businesses that gave up a lot of office space during the pandemic could use coworking spaces as a way to expand.
And in the future, experts believe, there will continue to be coworking spaces owned and managed by the owner of a building, or by a company with a management agreement in place, instead of just service providers. traditional coworking as we saw a few years ago.
A move towards more of these spaces occurred before the pandemic and is expected to continue.
“Investors and landlords are more creative in how they think about flexible offices,” Smith said. “In some cases, they launch their own brands where they offer flexible offices in their buildings. … other times they will partner with a supplier.
Smith added that space is also seen as a way to grow or shrink a business and that “owners see flexible office space as part of their strategy for what it directly offers them and what it acts as a convenience for their tenants. … This brings revenue to the building and is a benefit to their existing tenant base.
Experts agree that while some niche coworking businesses have had to close during the pandemic, some are expected to open with childcare offers and those catering to the film and TV industry will be in high demand.
And traditional carriers are likely to grow too.
“Coworking spaces around the world are expected to more than double over the next two years. Businesses are really using flexible space,” Durnin said. “Coworking is no longer the thing you had to go to if you couldn’t fit into an office and now it’s a choice.”