How to Compete with Co-working Space | FTI Consulting

How to Compete with Co-working Space

Co-Working Space Is Raising the Bar for Attracting Small-Space Tenants

Real Estate | Corporate Finance & Restructuring | (Reprint)

March 15, 2016

Coworking Space

Temporary “serviced” office space for small space occupiers has been a part of the U.S. marketplace for some time. Historically, it offers a “plain vanilla” short-term “executive” space solution to professional services firms and sales organizations. Economic development organizations extended the concept to include “start-up space” for fledgling local firms. Alternatively, high occupancy and rising rents for any quality small office space in many markets has left the small space user in an unfavorable market, and with few options.

As entrepreneurship and small businesses strengthen and remain a bulwark of the U.S. economy, “co-working” space has emerged to meet the needs of the next generation of small space occupiers. Its rapid adoption by the marketplace is a credible threat to the established small space office market (listings of 3,000 square feet or less). In Manhattan, Class B & C office space accounts for approximately 19 million square feet and small space constitutes approximately 38% of the listings. The small space occupancy rate is approximately 10% higher than the rate for the total Class B and C inventory (92% versus 83.5%) and is a key component of value.

Co-working facilities cater to a new class of entrepreneurs and independent workers seeking a distinct and collaborative working environment. Co-working facilities are designed to inspire a “user experience” based on an open space plan, “big office” amenities and services, and programs/events that promote a business culture that values community/social impact, creativity, and information sharing found in many successful start-ups and in particular, among technology and creative companies.

In gateway cities, co-working space can be cost competitive with traditional small office space. It offers a “turnkey” solution with an easily understood flat rate occupancy expense, lower initial capital outlays, and value-added amenities including, but not limited to a lounge, Wi-Fi, phone, office furniture, receptionist, conference room, business seminars and social events. These features combined with the flexibility of a month-to-month lease and easy scalability to meet changing space requirements makes co-working space a value-added proposition well received by the small space occupier. Class B and C office properties will be challenged to compete as co-working space “raises the bar” for attracting small space occupiers.

Posted with permission from, a division of ALM Media Properties, LLC. Copyright© 2015. All rights reserved.

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