Embrace the Latest Investing Trend: Coworking Office Properties

Real estate investing is hailed as one of the best ways to diversify a portfolio and gain greater financial prosperity. If you want to be successful in 2019 and beyond, you might consider coworking spaces, one of the latest trends in the real estate industry.

A good coworking investment requires market research. You need to seek the right location where coworking spaces are popular. You also need to understand the demand and where your investment can have the most impact. But most importantly, you need to understand why coworking spaces make a fantastic investment.

Remote Work Is on the Rise

Before diving into some of the benefits of a coworking space investment, it’s important to look at the key buyers: self-employed and remote workers. Since 2014, the number of remote workers has steadily increased. The 2017 U.S. Census report showed that more than 5 percent of U.S. workers worked from home in 2017. That’s around 8 million people.

Countless studies have revealed the benefits of working from home, including a Gallup poll that showed work-from-home options lead to greater retention. The poll also reported that it’s usually more affordable for startups and corporations alike, and working from home may also improve employee productivity.

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“The trend towards home work been particularly pronounced among certain types of workers. Managers, finance professionals, designers, and, above all, computer scientists have seen large increases,” says Dan Kopf of Quartz at Work. “These high-skill professionals are in a position to negotiate to work wherever they want, and they use this leverage to their advantage.”

High Demand

As the work-at-home population has increased, so has the demand for coworking spaces. Remote work is an amazing productivity booster for most employees, but sometimes it’s hard to be sequestered at home. There are also distractions from family and responsibilities that make it difficult to complete work. A coworking space can help resolve that problem.

One owner of a NY-based co-working space reported that a chief drive for renting co-working spaces is the desire to work with other people. “People with laptop and cell (phones) can work from anywhere, but a lot of people want to go to co-working spaces so they can be inspired by other people in other businesses,” he told U.S. News.

Along with wanting to be inspired, remote workers simply get lonely. About 45 percent of those who are self-employed report that the struggle of loneliness and isolation make it difficult to complete work on some days. For these individuals, coworking spaces alleviate that problem.

It’s not just self-employed individuals who work from home who invest in these spaces. Many corporations have seen the value of renting coworking spaces for a couple of years because they want a better location downtown. They often get stuck in the suburbs or an office park otherwise, while a downtown location would be better for business.

Another coworking space CEO mentioned to U.S. News that larger corporations often rent out their space. “We are seeing bigger companies trying to manage their companies with our real estate,” he said. “We are seeing General Electric Co., Dell, Bank of America, and a lot of other blue-chip companies taking bets. They are able to expand and contract their space according to the demand they are seeing from their company.”

It’s simply more cost-efficient for individuals and businesses to rent out such a space, and the high-demand all but guarantees that certain markets are poised for co-working space investments. You can often charge higher rents because there are multiple participants, making it a more profitable endeavor than a typical commercial investment.

Making a Smart Investment

By this point, you, like many other real estate investors, have become convinced that coworking spaces are a smart investment. However, they’re certainly not for every market. Some areas are simply too small to sustain a coworking space. In fact, some coworking markets are showing signs of leveling off or decreasing, especially as the economy shows signs of a slowdown.

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“That’s the single biggest risk when you are investing in an industry like this; no one knows what it will look like in the next recession,” says economist Marty Caverly. “It might be better or a lot of coworking spaces might end up in a lot of trouble.”

Like any real estate investment, location is the most important factor. One Global Workspace study revealed that users prefer a workspace that’s close to their home and easy to get to. About 80 percent of coworking members live within a 30-minute commute from the space.

The key takeaway here is there must be a large population of work-at-home individuals within a short drive of your coworking space. Otherwise, you’ll have a difficult time filling vacancies and magnifying your investment.

Exponential growth in the market indicates that now is the best time to invest. With the millennial generation making up the largest in the workforce (comprising 75 percent of the workforce by 2030), the number of remote workers will continue to grow. They’ll continue seeking co-working spaces, and if you’re smart, you’ll jump into the market before it peaks.

Are you interesting in investing in coworking spaces? Why or why not?

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.