Co-working Investments: What exactly are they?

Shared workspaces are catching on across the globe, as the collaborative concept transforms the modern office sector. Where are the world’s biggest and best shared workspace cities?

What is a shared workspace?

A shared workspace is just that: a shared office environment for workers from different companies. These dedicated workspaces cater to the growing number of entrepreneurs and self-starters opting to build their own businesses around the world, offering all the facilities and support that a company needs, with minimal overheads and maximum flexibility.

Why are they so popular?

The appeal of a shared workspace has exploded in recent years, driven by the rise in freelancers and self-starters in the world’s top technological and financial hubs. According to the Professional Contractors Group, there are now 1.4 million freelancers in the UK, up 14 per cent in the last decade. In the US, there are 53 million, according to the Freelancers Union, accounting for 34 per cent of the national workforce. This new generation of digital-age workers are keen to connect and collaborate, driving demand for a new type of office space, one that is both flexible and affordable.

High-profile developments have now launched in London and New York and other major cities. Shared workspaces have grown more than 10 per cent across the US in the last year, according to research by The Instant Group, with the country’s total flexible workplace market now incorporating over 3,500 centres, the largest number in the world, ahead of the UK on 3,290 centres.

How do the investments work?

Investing in shared workspaces works on a very simple principle: the office space is split up and let out month-by-month to individuals and companies, generating rental income for investors. There are many opportunities for additional income, from renting out meeting rooms or event spaces to on-site food and beverages. Almost three quarters of shared workspaces become profitable overall within just two years, according to Deskmag, with privately-run spaces reaching that stage even faster.

As a result, the sector has become an increasingly popular asset for commercial property investors, with one leading brand’s valuation rising to $16 billion in 2016, up from $5 billion just two years ago.

The world’s top shared workspace cities

Co-working is not just a US and UK phenomenon: everywhere is keen to get a piece of commercial property’s new star, from Milan and Geneva to Sofia and Ghent.

New York

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New York is the biggest city in the USA for shared workspaces and has held that title for several years.

Along with four other states (including tech hub San Francisco), the city is responsible for almost half of all growth in America’s co-working market.

Today, New York has over 200 centres, according to The Instant Group, up more than 5 per cent in the last year. Work station rates have remained steady, due to increasing supply levels, but it remains the country’s most expensive market, with an average desk rate of $1,407.

Dubai

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Dubai’s residential real estate may be on course for recovery in 2017, but its office market is already thriving, with vacancy rates falling and take-up high.

The emirate is now the Middle East’s largest co-working location, with 31,000 sqft dedicated to the growing sector. Demand, however, is outstripping supply by 3:1. There are currently around 7,800 shared workspaces open in Dubai – up from just 30 in 2006. That number is now doubling year on year.

Miami

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San Francisco is famous as the home of Silicon Valley, with freelancers and entrepreneurs virtually on every street corner. Florida, though, is also enjoying a shared workspace boom.

One of the four largest state markets in terms of the number of executive suites or serviced offices opened in the last year (alongside California and New York), flexible office developments are on the up too. In Miami alone, the number of shared workspace centres has risen 7.1 per cent in the last year to hit a total of 75. Demand is still outpacing supply, driving desk rates up by double-digits to an average of $857.

Birmingham

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The UK’s second city, Birmingham is enjoying something of a commercial boom, with the HS2 high-speed rail line to London set to open in 2026 and the city centre recently benefitting from landmark redevelopment of both New Street station and the surrounding shopping centre.

As a result, Birmingham was ranked as the top UK city for investment prospects in ULI and PwC’s 2016 Emerging Trends in Europe report. The office market, in particular, is attracting occupiers, investors and developers alike, with HSBC recently moving its retail division to the city.

With a thriving student base feeding into the country’s booming freelance and entrepreneur population, shared workspaces have found a natural home. Indeed, Birmingham’s average desk rate is an attractive £246 a month, according to SpareOffice, compared to London’s expensive £357 a month.

Marbella

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The startup bug hasn’t just infected the USA and UK: it’s spread to Spain too. A handful of regions account for almost 70 per cent of the country’s thousands of startups and Andalucia is right at the heart of that growth.

Social media and e-commerce are the most active sectors, with training schemes such as Andalucía Lab encouraging and nurturing businesses in the region. Spain’s economy is now one of the fastest growing in the Eurozone. Coupled with the government investing €1.6 billion in upgrading infrastructure in Malaga and the surrounding area, the Costa del Sol has become one of Spain’s most attractive destinations for entrepreneurs as well as tourists, creating an urgent demand for shared workspaces in cities such as Marbella.

I’d like to find out more about investing…

coworking space

More than an office, shared workplace developments offer collaboration, networking events, speakers, lunch sessions, access to private equity and VC mentors, as well as angel investors. There is a long list of other benefits, including refreshments, concierge services, local discounts, software experts, office facilities and more.

With a growing arsenal of investors, the sector is expanding in key gateway cities such as the above over the next three to five years.

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