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Atlanta Blog

The Co-Working Trend: Friend or Foe to CRE?

April 3, 2017 | by Nance Donaldson, CCIM

On March 2, CREW Atlanta met to explore the impact of the “co-working” trend on commercial real estate in metro-Atlanta. The speakers included Christian Devlin, who leads the technology and media practice at CBRE; Chris Estrada, founder and CCO of The Operation Spot, which provides strategy consulting to providers of co-working space; Erin Greer, studio director and Southeast media leader at Gensler; and Chad Turner, general manager at ROAM. The panelists discussed whether the rise of co-working will bring about “the end of the 5000-square-foot lease.”

Co-Working Explained

Co-working companies offer flexible, short-term (often month-to-month) leases for office space. Tenants typically include freelancers, two- to four-employee start-ups, and established companies.  Co-working leases allow tenants to expand into more space if they grow, or to walk away if they don’t. The result is a diverse mix of entrepreneurial people and companies in a small space, which often sparks collaboration and innovation and provides an informal venue for publicizing a new business.

Co-working space is designed to be flexible and can be reconfigured easily. It often includes “activity-based” subspaces like conference rooms, social space, collaborative space, event space, and “heads-down” areas for quiet concentration. Some facilities rent out conference rooms for a set number of hours. Co-working spaces sometimes cater to particular markets or verticals; for example, one Atlanta facility offers a co-working kitchen for chefs to try out new food concepts, while another provides space for start-up attorneys.

Atlanta’s Co-Working Trend

In recent years, metro-Atlanta has become a co-working hotbed. According to Chad Turner, there are over 30 co-working spaces in the metro-Atlanta area. The Atlanta Business Chronicle reports that metro-Atlanta has about 450,000 square feet of shared or co-working spaces, including about 200,000 square feet concentrated in Buckhead.

Taking up much of that Buckhead co-working space is Atlanta Tech Village, the Southeast’s largest co-working office environment for emerging technology companies and tech start-ups. The 103,000-square-foot building at the intersection of Lenox and Piedmont Roads was 90 percent leased within a year after its build-out began.

Atlanta’s co-working market also includes national competitors like WeWork and Industrious, as well as local players like Roam. New York-based WeWork’s 80,000-square-foot Buckhead location is more than 80 percent leased, says the Chronicle, and the shared workspace provider is looking at additional sites in the metro area. Meanwhile, Chicago-based Industrious has about 40,000 square feet of co-working space at Ponce City Market and Midtown. Both locations are fully occupied, so the company will soon expand into an additional 24,000 square feet at Ponce City Market.

It might seem like the Atlanta market is reaching its co-working saturation point, but co-working companies continue to expand here. Regus Group’s co-working brand, Spaces, is looking at sites in North Fulton—Avalon among them—for a 30,000-square-foot facility, according to the Chronicle. Spaces, which aims to appeal to a young, hip demographic, already has locations in Midtown and at SunTrust Park. The company tends to seek out buildings with character in urban and walkable submarkets; in suburban markets, Spaces looks for dense, walkable, mixed-use developments.

Threat or Opportunity?

The popularity of co-working space may seem like a threat to the traditional commercial real estate business, but when approached strategically, it can become a valuable opportunity. Co-working allows young companies that cannot yet qualify for traditional financing to launch a business and expand quickly and nimbly. Once that company grows past a certain point, it will need larger space—and a real estate broker to help find it.

Traditional office buildings that are close to co-working sites often benefit from young, growing companies’ search for larger space. The building next door to Atlanta Tech Village, for example, now offers more flexible, year-long leases to capture the ATV clientele as they expand. Thanks in part to this strategy, the building is now 90 percent occupied. Some landlords are even starting to view co-working space as an amenity that they can offer tenants.

Real estate brokers can refer clients to co-working space when they are too small for permanent space, and then check in with them again in 12-15 months, after they have had a chance to grow. With just a little hand-holding, that nascent start-up could someday evolve into a major-league tenant.

Blog contributed by Nance Donaldson. Nance has over 25 years of experience in all facets of commercial real estate.  She represents tenants from a wide range of industries with a special focus on those in financial services and high tech industries.  For more information on co-working space, move-in ready suites, and traditional offices with flexible terms, contact Nance at 404.446.1586 or ndonaldson@cresa.com.