How the Freelance Economy is Shaping Commercial Real Estate
The gig economy is driving national growth in the shared office sector.
The remote workers and freelancers who thrive in collaborative work spaces are driving a movement that’s bigger than themselves. With increased demand for shared office spaces, commercial real estate landlords and developers have been forced to adopt a new approach.
In Curbed‘s coverage of Instant‘s report, we see that 79% of the companies that make deals for large spaces in shared offices (40 desks or more) have been major corporations. Furthermore, the number of deals for these large spaces has tripled over the past two years. Big companies are adopting the spirit of the shared office, and they’re using coworking spaces to establish satellite offices and dedicated work spaces for specific project groups.
The corporate demand for coworking spaces has pushed up demand for the whole sector. For example, New York City has seen a boost in new office development, with 26 million sq ft of new space currently in the works.
This trend is good news for landlords because coworking spaces don’t just boost overall demand; they also boost profit margins. Shared offices house more tenants with less space, so there’s every reason in the world for landlords and developers to get in the game.
If workers adopt a new style of work, office spaces will inevitably have to adapt. In this sense, the gig economy that’s defining the decade is doing much to shape the commercial real estate business. The shared office sector is expected to grow now that corporations have picked up on the movement, and secondary markets will see a burst of new development.
In particular, smaller cities that are both near a major metropolitan area and that used to have an industrial presence are strong candidates for development. Proximity to an urban center means that newcomers will move in as the downtown area becomes too expensive, and the presence of old manufacturing buildings provides plenty of opportunity for developers to convert and repurpose old buildings. Converted offices are easier and cheaper to construct than entirely new developments, so these regions will be able to provide enough supply to meet the overflow demand from the local metropolitan.
For those in the commercial real estate industry, it’s an exciting time. Developers and designers are constructing a new type of office, and brokers are learning a new set of value propositions to pitch to both tenants and landlords. The shift to shared work spaces might have seemed like a local issue at first, but now that it has taken hold, the entire industry is moving with it.