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Coworking Companies Look for Growth Opportunities

Orange County coworking firms are looking to take advantage of current leasing trends, as local employers seek flexible space options and figure out their back-to-work plans.

Shared space providers have taken a hit over the past year, with coronavirus restrictions and shelter-in-place orders forcing consolidations across the industry.

Now, as employers try to get back to an in-person workforce, there appears to be an opportunity for coworking companies to provide office space on a short-term, flexible basis.

“Demand has picked up as of late, with many operators fighting for expansion opportunities,” said Stefan Rogers, an office and coworking specialist at Voit Real Estate Services. “Some coworking sites are seeing upwards of 80% occupancy, as COVID-19 has helped bolster demand for flexible office spaces.”

There are still headwinds, most notably the coronavirus Delta variant, which has some operators “kicking the can down the road,” Rogers notes.

“In the long term, I think demand for coworking will be double what it was prior to COVID-19,” he added.

Service-Oriented

The office sector has become more service-oriented in the wake of the pandemic, with landlords and employers looking to provide unique amenities and offerings to encourage employees to return to the office.

Coworking companies are following suit, such as the addition of day care facilities, upgraded outdoor meeting areas and a renewed investment in technology.

These spaces are also emphasizing the ease of desk hoteling, an in-vogue option for employers looking to only have part of the staff in the office at a time.

This comes as some larger employers look to consolidate their physical office footprint, and as some employees prefer a work-from-home or hybrid office situation.

“As bigger operators look to ditch their satellite offices, coworking can come into play as an option for companies to restructure their footprint in a more cost-effective manner,” Rogers said.

Such was the case for PepsiCo Inc., which moved a good portion of its western U.S. operations a few years ago to Irvine’s Boardwalk office campus along Jamboree Road through an enterprise deal with New York-based WeWork, which previously operated a nearly 64,000-square-foot spot at the complex.

Consolidation, Growth

Despite some well-publicized givebacks in OC and other markets over the past 18 months, WeWork is No. 3 on this year’s list of the largest local coworking space providers with 344,773 square feet in Orange County. In 2019, its portfolio of open and soon-to-open locations in the county ran about 450,000 square feet total.

Other area consolidations include that of Australia-based Servcorp, a shared space operator that shuttered more than half of its U.S. locations including its single Orange County location at the Irvine Towers office complex; and Work Well Win, which backed out of its first planned Orange County location last year.

Companies that have been consolidating are typically ones who faced internal issues prior to the pandemic.

Those on a more stable footing with better funding have managed to grow their business in recent months, such as Irvine-based Premier Workspaces.

The company said it plans to capitalize on the larger industry contraction seen in the wake of the pandemic, with goals to add 100 new locations in the next few years.

That goal, if met, would more than double the firm’s existing portfolio.

Premier, previously known as Premier Business Centers, counts 90 locations in the U.S., totaling about 1.6 million square feet. In Orange County, it has long been the largest shared office space operator with more than 460,000 square feet here now, up about 5.5% from last year.

New York-based coworking operator Industrious is also bucking consolidation trends.

The company continues to expand locally by partnering with Orange County landlords, most recently pairing with Plano, Texas-based Granite Properties to take over a shared space location in Newport Beach left vacant by WeWork.

The company ramped up its local footprint to 223,039 square feet this year, up 71% from last year.

“Industrious has a demonstrated and proven track record, and their unique business model is how they have sustained their success throughout the pandemic,” Jason Purvis, senior managing director of Granite, told the Business Journal earlier this year.

Retail Opportunity

In addition to partnering with office landlords and picking up spaces left vacant by more troubled operators, those coworking companies looking to grow may target underused retail sites as a source for growth.

Saks Fifth Avenue recently announced plans to convert some of its department store space into coworking locations by partnering with WeWork in New York City.

WeWork may have additional growth opportunities ahead following a move by Cushman & Wakefield, which plans to buy a stake in the coworking company as it again looks to go public this time by merging with a special-purpose acquisition company backed by one of the owners of the Sacramento Kings.

Cubework

The past two years, Premier Workspaces has competed with WeWork for the top spot among OC’s cluster of shared space operators, in terms of overall square footage.

Both have lost out to a newcomer to OC’s coworking scene, which snagged the top spot in its first year on the Business Journal’s list.

Cubework is not the traditional office shared space provider; it instead offers flexible lease terms for users of industrial space.

The City of Industry-based company counts a 1.3-million-square-foot portfolio in Orange County, including three soon-to-open locations in Anaheim, Garden Grove and Huntington Beach.

The company was involved in the top industrial lease in 2019 when it inked a 1.1-million-square-foot lease to occupy the entirety of CenterPoint SoCal Logistics Center.

CubeWork is reported to occupy part of the facility along Valley View Drive in Buena Park. 

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