Despite the COVID-19 pandemic uncertainty, markets have demonstrated that the demand for coworking or flexible workspaces will continue to grow. Commercial real estate firm Jones Lang LaSalle predicts 30 percent of the office market will be flexible by 2030. Employers are now seeking to reduce costs and office density, while employees are demanding more flexibility in their work schedules following a year of working from home.
In response, many companies are embracing hybrid work models. According to PricewaterhouseCoopers, 87 percent of executives anticipate shifts in their real estate strategy over the next year. Some organizations have turned to consolidating offices and providing memberships to coworking and flexible spaces to better support remote workers or employees who wish to work outside of the office one to two days a week.
Opportunities for New Construction
This increase in hybrid and remote work structures provides opportunities for mid-size cities such as St. Louis, following the exodus of workers from larger metropolitan areas such as New York and Los Angeles. With workers relocating to smaller markets, employers can still retain the best talent by utilizing coworking spaces. This shift has led to new development in the St. Louis area. Recently, the St. Louis Cardinals partnered with The Cordish Companies to develop a 30,000-square-foot coworking space in Ballpark Village; it will include a mixture of individual workstations, private offices and suites. This is the third location for The Cordish Companies’ coworking brand, with locations in Baltimore and Kansas City’s Power & Light District.
Modifying Existing Spaces & Leases
More than just an office, coworking and flexible spaces are also a favorite amongst small business owners seeking collaboration, flexibility and growth. St. Louis-based coworking spaces such as CIC@Cortex, ThriveCo, OPO Startups or RISE Collaborative Workspace, offer members part-time and full-time private offices, collaborative spaces and business amenities such as Wi-Fi, furniture, coffee bars and community events space. A touted benefit of a coworking space is the opportunity to meet other individuals. Many members have found success establishing new clients and business connections due to the relationships they have built in the shared space. With month-to-month memberships, companies and individuals can try different locations to find the best fit without worrying about long-term leases. Coworking spaces such as ThriveCo also provide tailored concierge services that grant access to virtual assistants, business consultants, graphic designers and more. Accountants are also available in some coworking spaces to promote business development and success.
ThriveCo’s co-owner Katie Silversmith says her firm has seen an increase in interest during the pandemic. ThriveCo reported a waitlist for new members seeking offices in this coworking space.
According to Coworking Insights’ 2020 Future of Work Report: What the Future Holds for Coworking & Remote Work, 71.5 percent of workers who used coworking spaces prior to the pandemic will continue to do so, while 54.9 percent of remote workers who had not previously used coworking spaces are considering joining one as a remote or hybrid work model option.
Conclusion
With the future of office space continuing to evolve, industry sources project a substantial growth in flexible workspace supply and demand. Investors are expected to incorporate more flexible leasing options in their real estate operational models. Therefore, we anticipate a growing need to negotiate contracts for redeveloped spaces and renegotiate existing leases to reflect the changing market. Following the opening of St. Louis’ first coworking space in 2010, more than one dozen distinct coworking locations have developed across the greater St. Louis area, each with its own unique atmosphere and amenities. While still a developing market, one-third of commercial real estate portfolios could include coworking or flexible space by 2030.
Ashley N. Dowd is an attorney at Carmody MacDonald in St. Louis and focuses her law practice in the areas of banking, real estate, corporate and business law. She can be reached at and@carmodymacdonald.com.
This column is for informational purposes only. Nothing herein should be treated as legal advice or as creating an attorney-client relationship. The choice of a lawyer is an important decision and should not be based solely on advertisements.