SAN DIEGO—Since new patterns in workplace occupiers have emerged and are projected to continue growing, so will the demand for flex and co-working space in the years to come, JLL EVP Richard Gonor tells GlobeSt.com. The company recently revealed that co-working-firm leases accounted for 44.6% (111,619 square feet) of the 2016 positive-net-absorption office total for Downtown San Diego, which begs the question of oversaturation. We spoke with Gonor about how much more the market can support of this type of space.

GlobeSt.com: With co-working groups being such a large chunk of the 2016 office absorption Downtown, how much more can the market support of this tenant/property type, in addition to executive suites?

Gonor: The co-working model has emerged through the latest commercial real estate bull cycle as the demand for “flex” office space has been a growing national trend. With the large Millennial population preferring to live and work in urban areas, Downtown San Diego has undergone an apartment boom to support this demand. San Diego is the #2 US city for Millennial population with 28% in this age group, and the Downtown concentration even higher with approximately 35% in this group. More than 50% of this cluster has a bachelor's degree or higher, so employers and co-working companies are now realizing the amount of available intellectual capital concentrated in our Downtown area. Their lifestyle demands a work/life balance and greater flexibility in a workplace that is also unique and interesting. In 2017, we should see the dozen existing co-working locations look to grow their memberships to fill these locations. However, since these new patterns have emerged and are projected to continue to grow, so will the demand for flex and co-working space in the years to come.

GlobeSt.com: With the market apparently becoming oversaturated with co-working options, where does the growth come from going forward?

Gonor: Over the next 30 years, we'll see the Downtown San Diego population nearly double. Today, we have approximately 25,000 apartment and condo units in our Downtown, but when I look out my office window I see a dozen cranes that are working to complete construction on 3,200 new apartment units that are getting ready to come on line. Also, Downtown continues to be the preferred office location for most companies that are relocating and looking for space that can add to their culture and branding. Since 2012, there has been over 750,000 square feet of tenant migration into Downtown from either the suburbs or outside the county. This growth, combined with the workforce changes, has transformed what the worker looks for in a workplace and their decision process when they decide on which company for which they want to work. Co-working spaces are designed to meet this demand, which are typically inspired by residential and hospitality finishes and amenities while offering very flexible terms.

GlobeSt.com: Is the co-working business model recession proof?

Gonor: Flex office space is a concept that is here to stay. The workforce has changed, resulting in the transformation of the workplace. Today, the worker wants space that is less of a commodity and is more inspiring, coined “creative” office space. This is the environment that co-working spaces look to offer. In addition to the individual worker, many companies are looking for more flexibility due to a variety of reasons such as changing trends, regional expansions and shortened business cycles/contract assignments. Also, technology has allowed for a 24/7 workforce that is now mobile and can now work from anywhere they want to be, creating the virtual office.

GlobeSt.com: What else should our readers know about co-working space as we near the end of this cycle?

Gonor: More than 55% of the businesses located Downtown are small growing companies occupying less than 5,000 square feet. Also, Downtown is the #1 hotspot for start-ups in the county. More specifically, software startups have more than tripled in Downtown over the last couple years. These young companies want flexibility in order to grow since the visibility into their future of what their space needs will be is typically only a few years out. Given the growing entrepreneurial nature of workforce in Downtown, companies and workers have gravitated toward knowledge sharing, community building and flexible lifestyles, which are attributes that these co-working locations look to provide.

GlobeSt.com: With the market apparently becoming oversaturated with co-working options, where does the growth come from going forward?

GlobeSt.com: Is the co-working business model recession proof?

GlobeSt.com: What else should our readers know about co-working space as we near the end of this cycle?

Instant Insights /

Is DTSD's Co-Working Space Becoming Oversaturated?

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