Is Co-working a Better Deal Than Direct Office Space?

Co-working space in Los Angeles is more cost-effective per-person than the direct leasing space. New research on co-working through the United States from Simple Texting shows that Los Angeles is among the handful of markets where co-working space is less expensive that direct leasing space—but only nominally. Co-working space in Los Angeles is about $4 less expensive per person than standard office space, on average. San Antonio, Charlotte, New York City, Portland and Seattle are the only other markets in the country where co-working is less expensive than direct leasing space.

“It should be noted that the analysis isn’t exactly comparing apples to apples,” Emily Berry of Simple Texting tells GlobeSt.com. “The calculations were intended to show only the difference in cost of a single desk an employee. If you were doing a complete analysis you’d have to factor in the cost of utilities, Internet, janitorial staff, etc. that all come along with renting an office space. Co-working memberships typically include a desk plus many more amenities and perks like free coffee at no extra cost. All that to say, co-working space is likely a much better deal than traditional office space in L.A. than the numbers let on.”

With amenities, quality design and onsite management in addition to the lower cost, office owners will need to lower costs or provide additional amenities to stay competitive. “I think at a certain point they’re going to have to in order to stay competitive,” says Berry. “If they are not able to adjust price, it wouldn’t surprise me if they started throwing in perks similar to those that a co-working space offers. One of the benefits of utilizing a co-working space is not getting locked into a long-term lease – I also wonder if the commercial real estate market will become more flexible on lease terms in order to compete with co-working in that regard.”

The cost benefits of co-working space are only one of the benefits. In general, office users are gravitating toward flexible office spaces and co-working space. “Before, if you wanted office space your only alternative was commercial real estate space, so you paid what you had to pay. In every area of our lives we’re being presented with so many options and the workspace industry has followed suit,” says Berry, adding that they are also an option for a wider range of companies, from start-ups to special project teams. “Co-working spaces are also an excellent office alternative for start-ups due to their flexibility on lease terms and availability of space for small companies. The cities with the most co-working spaces tend to be start-up hubs.”

However, start-ups are far from the only users, and the cost benefit will only help to drive more users to the market. “Shared workspaces are no longer just for start-ups. More and more larger companies are starting to use them as well,” adds Berry. “Many co-working spaces offer the option to rent a dedicated office space within the shared space and large companies like Apple, Microsoft, Facebook, and Samsung have moved portions of their staff to co-working spaces. WeWork’s largest deal to date was with Facebook earlier this year to lease almost 500,000 square feet in one of their Silicon Valley locations.”