Recent shelter-in-place protocols have undoubtedly introduced a more creative way to do business, though not the way the shared space sector would like.
Some are pointing to the opposite, with the pandemic raising questions on the sector’s viability.
Skeptical eyes were already on the coworking industry, largely thanks to the implosion of WeWork’s initial public offering and the subsequent financial fallout with Softbank, its main investor.
Now, there are new concerns of stability. Short-term leases for tenants, a key calling card for shared space operators, could be potentially crippling to those same operators, as financial impacts of the virus play out nationwide.
A recent JLL brokerage report on commercial real estate (see story, page 16) said landlords with exposure to short-term leases are the most vulnerable at this time, while “coworking operators in particular may be at risk if members decide to cut short-term contracts.”
Orange County has close to 3 million square feet of coworking space; most of that has opened in the past three years.
WeWork Open
WeWork recently opened its ninth area location since it entered the market in 2016, a full-building spot at Irvine’s Lakeshore Towers office complex, suggesting continued demand for the New York-based operator despite internal struggles that forced a pause in dealmaking last year.
It has more than 500,000 square feet in OC open for business, making it the county’s largest coworking operator.
The company’s entire U.S. portfolio, save a spot in Silicon Valley, were reported to be open as of last week.
“WeWork is home to many members whose companies are essential businesses—whether in healthcare, insurance, cleaning product supplies or others. All WeWork locations in the U.S. and Canada will remain open and accessible,” it said on its website.
The firm has “strengthened on-site cleanliness measures, such as more frequent wiping and disinfection, equipping each location with additional sanitization products, and working with building management to increase cleaning and sanitization of common areas.”
On-site staffing has been reduced, it said.
Sector Threat
On last year’s Business Journal list of the largest local coworking operators ranked by available square footage, Premier Workspaces was tops with nearly 471,000. WeWork then had just 212,785 square feet in operation.
Countywide, coworking makes up about 3% of total inventory of high-end office space in Orange County, according to Business Journal research.
Many of OC’s base of larger coworking spots were open as of early last week, though not at anywhere close to full capacity.
Communal spaces in many locations had been closed.
Brokers suggest recent events could prompt a drop in memberships that may last after the crisis, as workers grow accustomed to working from home, or perhaps choose a different option.
In turn, lease renewals and new deals will be threatened.
Creative Solutions
This shift could bring changes to more traditional office dynamics, as employees grow accustomed to remote work, and employers respond.
“I think it will make people rethink the way they sign office leases,” said John Combs, principal of RiverRock Real Estate Group. He said his team of 130 employees enjoys working from home.
“We put out a survey to see how our staff feels, and the majority said they would enjoy working part-time from home, part-time in the office,” said Combs, whose Newport Beach firm ranks No. 10 on this week’s list of OC’s top property managers (see page 27).
“It’s made us think of ways to do that, like having a check-in station in the office where employees can tell us when they want to come in,” which would cut down on business costs, and could help support the transition to a smaller office space.
