It’s Time to Embrace the Latest Investing Trend: Coworking Office Properties

by | BiggerPockets.com

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.

Related: Annual Rent Report: What Trends Did U.S. Markets See in 2018?

“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.”

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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.

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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.

Related: The Multifamily Sector is Overheated—So I’m Turning to THIS Profitable Niche Instead

“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?

Weigh in with a comment!

About Author

Larry Alton

Larry is an independent, full-time writer and consultant. His writing covers a broad range of topics including business, investment and technology. His contributions include Entrepreneur Media, TechCrunch, and Inc.com. When he is not writing, Larry assists both entrepreneurs and mid-market businesses in optimizing strategies for growth, cost cutting, and operational optimization. As an avid real estate investor, Larry cut his teeth in the early 2000s buying land and small single family properties. He has since acquired and flipped over 30 parcels and small homes across the United States. While Larry’s real estate investing experience is a side passion, he will affirm his experience and know-how in real estate investing is derived more from his failures than his successes.

6 Comments

  1. Jerry Maze

    I love this idea… I actually was considering using one myself… however, I’m not sure Kalamazoo MI has any of these… also, it’s hard to consider adding costs when I can easily continue to work from my home… but, you nailed two key reasons it is intriguing …. interaction and inspiration from co-worker & other entrepreneurs! It does get rather lonely at times working in an isolated environment… but, then there is no office drama! Hey, pros and cons to everything! Lol

  2. Richard Sheltra

    So yes it definitely sparks my interest. I work in DC as a Sgt in the DC fire dept. Was just in the center of town working at a FH when I saw a brochure left for us to review of a building being remodeled for coworking space. Including a glass enclosed area that is on the roof with a view of DC. Been a general contractor as well for 20+ yrs, yes I have 2 careers lol, the spaces look very modern and well designed. My fear, which should drive me to take a chance, would be this, rent in DC is already VERY high. Like to an extreme.. With that said thou, there has been approximately 15-20 cranes in the air last 10 yrs with new buildings and remodels going on. The bust never hit in the city, in fact real estate is almost unattainable. The median salary of $165,000 drives it up of course. I guess I would need direction of how to do the demographs of how much rent should be, how you figure that out, how do u find out the amount of potential renters etc. It’s a game I have never been in but with the mad rush that has no end in sight in DC, makes me very interested in this aspect of the game. Any pointers of how I can educate myself on this subject would be greatly appreciated.

  3. Derek Robinson

    I actually live in an area that met all requirements for a successful coworking venture. I’m in Asheville, NC. We’ve seen a ton of growth and the area continues to grow. Real estate prices have gotten so high that locals can no longer afford the area, but we are seeing a ton of remote workers from other less expensive areas come in and buy up houses. Before I opened the space, the interest was very high, but once the space opened, the interest level dropped substantially. It seemed that people were content working from home or coffee shops. Everyone was interested in the concept, but very few wanted to pay for it. My pricing was on par with other co-working businesses in the area and we had more offerings and advantages. As I got to know more operators in the area, I found quickly that most did coworking as a side project, not as a business. Some were just investing in the property itself, running their companies out of the building, and providing coworking as a use of the empty space. Since I closed mine down, several more have come and gone quickly. The only one’s left are just hobbies of building owners. Most seem to make the majority of their money running side hustles for their buildings, like renting out event space for networking events or hosting their own events.

    I’ve seen this same trend with other markets and highly publicized coworking spaces (Asheville, NC, Durham, NC to name a few). It may work well in some markets, but I have my doubts. I’ve met with at least 8 coworking operators and unless they have other sources of income, none of them are making it on coworking alone.

    Just my 2 cents 🙂

  4. Ratan Khatri

    Hello, I own a 12000 sq ft office building in muskegon, mi. Although the region has improved economically. It still is not booming with new business start ups. I have been marketing like crazy to get people to use my space for co working office, or any other way. What can I do besides just lowering the price to fill up this building? Please advise.

    • mike reynolds

      I have no experience in this market, I am just thinking out loud here. What if you charged membership like a gym or something and had it ACH transferred monthly? Have different tiers of membership and charged extra for like conference rooms on the lower tiers but maybe included them on the higher tiers.

      Maybe find some way to get the ones you have to interact with each other like a monthly get together?

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