Co-working spaces could become a valuable way for CRE investors to fill vacancies at their properties while allowing businesses access to flexible space
Before COVID-19 hit, co-working spaces were becoming quite popular. These locations provide all the office amenities businesses or independent workers needed—and some human contact—without requiring them to sign a traditional lease.
Freelancers, small teams, startups, and entrepreneurs took advantage of these spaces because they could rent them by the day or month on an on-demand basis. When they didn’t require office space, they could return to their home offices or alternate locations.
Co-working offices took a significant hit during the pandemic for obvious reasons. But we could see them becoming even more common as we return to normalcy. Here’s a look at the possible future of co-working in South Florida.
What do co-working spaces offer?
Co-working offices might feel like a traditional office in a lot of ways. As you walk into the building, you may see some people meeting in conference rooms, others working at their computer desks, and private offices hosting small teams.
The biggest difference is that most of these people work for different companies or themselves.
These shared workspaces make it more affordable for individuals and smaller organizations to access a full office’s amenities. They often have meeting rooms, kitchens, and all the equipment tenants need without requiring them to purchase it themselves or lease a finished space long-term.
Leases are typically available per day, week, or month, depending on the tenant’s requirements. CRE investors who own these properties can come up with a model that best suits their goals, as well. Tenants can choose to share their workspaces with other companies or have an area all to themselves, too—it all comes down to how often they’ll be using the space.
How the pandemic changed things
Of course, COVID changed almost everything in the business world, including causing countless offices to shut down and forcing employees worldwide to work from home. There was far less need for office space in the immediate aftermath. And a portion of this reduced demand has stuck around, as some organizations gained efficiencies from the remote work experiment or downsized significantly.
Co-working spaces also took a massive hit because there was little reason for startups, freelancers, and smaller companies to access office space. Virtual meetings became the norm, and workers and founders realized they could just stay home, even after lockdowns ended. There was less need for teams to work together in a shared space, and hosting representatives from other companies became a thing of the past.
The concept of social distancing is also entirely at odds with the co-working model. It was challenging for any office setting, let alone a building that multiple firms share. Many co-working spaces also utilize shared desk space, which turned cleaning and sanitization into an around-the-clock expense and spurred other, costly safety procedures for owners.
While co-working spaces didn’t completely shut down during the pandemic, there was a considerable slowdown from which they have yet to recover. It could be coming soon, however, assuming we get the delta variant of the virus under control.
The future of co-working spaces
An interesting wrinkle to the pandemic’s impact is that shared office space could become even more popular as the business world emerges.
First, there’s the fact that many employees have tasted the work-from-home environment and aren’t in a hurry to return to the office full-time. If companies aren’t using their current office space, it can make sense to rent out a co-working office so employees can remain home part-time while having access to professional amenities when they need them. Hybrid work arrangements are becoming common—in fact, they are now the norm—so flexible resources benefit employees and companies who want to control their overhead adaptably. We may also see renewed CRE investment interest in South Florida co-working properties, given the area’s influx of tech startups and established companies that may seek out these buildings. And co-work offices can be an opportunity that requires relatively minimal improvements for landlords who have unused space.
Caveats and factors affecting a co-work rebound
The popularity of co-working spaces in the short term is likely dependent on how quickly South Florida recovers from the pandemic. As of this writing, the state is experiencing a fourth wave of the virus, averaging over 20,000 cases per day. The statewide rate for full vaccination also remains only around 50%. Nevertheless, both Florida’s current administration and many residents aren’t inclined to return to the restrictions of 2020. And there is and will be a greater desire to stop working from home every day, even for those who still have the option.
Morris Southeast Group is watching all the trends that affect South Florida’s commercial real estate industry, including the popularity of co-working spaces. We can provide advice as you look to diversify your holdings and invest in desirable properties in a post-pandemic world.
Give us a call at 954.474.1776 for insight into your CRE investment portfolio. You can also reach Ken Morris directly at 954.240.4400 or kenmorris@morrissegroup.com.
