Franchises, revenue-sharing and service firms operating shared workspaces are trending
SANTA BARBARA, Calif., Feb. 17, 2021 – As the pandemic recovery and vaccination efforts ramp up, office-using employment has remained stable thanks to remote work options. According to the CommercialEdge Office National Report for February, the national average full-service equivalent listing rate in January was $38.32 per square foot, an increase of 26 cents from December. The national vacancy rate increased 40 basis points to 14.6%.
Key to the stability was office work’s ability to continue operations in alternate locations. “This marks a stark contrast from past recessions, when office-using job losses were more severe than those in other sectors. For instance, the dot-com crash and the Great Financial Crisis were facilitated by office-using industries, which consequently took the brunt of the damage,” states the report.
One part of the office market that has drastically changed, though, is the coworking and flexwork space. Industry giant WeWork has closed more than 100 locations since the pandemic began. Leasing walkable, typically pricey downtown real estate and subleasing to coworking users has not been a sustainable business model over the last year. Franchising and revenue-sharing structures look to be more prevalent for coworking in the future. Also, real estate service firms are beginning to open up coworking spaces.
Examples include CBRE’s Hana, which recently opened its third location in the U.S. and plans to open three more early this year. Newmark agreed to purchase Knotel after the coworking firm filed for bankruptcy protection, and JLL took over the flagship space of the now defunct MakeOffices in Washington, D.C.
“That real estate service firms are looking to operate their own coworking spaces while so much of the industry is in flux suggests coworking will be an integral element of the recovery. Businesses may be hesitant to sign long-term leases, and coworking could bridge that gap,” states the report.
Gain more insight in the latest office report from CommercialEdge.
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