Catalyzed by exploding consumer demand, the coworking industry has experienced exponential growth over the past several years. 2019 proved to be no different. As of September, coworking reached a footprint of 93.2 million square feet, taking up 1.7 percent of office stock in the top 50 U.S. markets.
The coworking market is projected to continue growing well into the future, with several key industry trends and innovations expected to shape the industry in 2020.
Here are three emerging coworking sector trends that will continue to shape the way businesses and teams work in the coming year:
1. More Coworking Spaces in Suburban Markets
Initially, many coworking brands focused their expansion efforts in densely-populated urban and metropolitan areas. The top six traditional primary commercial real estate markets — New York; Los Angeles; Washington, D.C.; Chicago; Boston; and San Francisco — account for 44.1 million square feet of coworking leases, or 47 percent of total space.
However, more suburban areas are also now seeing a greater number of shared workspaces enter their markets, taking up 63.3 million square feet or 2.7 percent of total urban stock.
This is largely due to a growing number of workers in these areas, particularly those working for technology companies or at home. So far, Las Vegas, West Palm Beach and Miami represent the markets with the largest share of suburban coworking spaces.
Expansion outward from urban markets is a trend that will continue in 2020 and beyond, as more brands capitalize on the strong demand, growth potential and market availability in suburban areas.
2. Increased Utilization of Shared Offices and Flexible Workspaces
Coworking spaces have been increasing in size each year, while also serving more members. A 2018 study showed the average coworking space occupancy increased to 1.2 members per desk, signaling coworking businesses’ trend toward fitting more people into the same amount of space.
There was also a 25-percent increase in private offices taking over event spaces and common areas, which indicates stronger demand for variable workplace settings. Maximizing profitability per square footage has been a long-standing strategy for shared workspace owners to boost their bottom line, and the trend will continue to gain traction in 2020.
3. Growing Profit Potential and Diversification for Coworking Spaces
Now that coworking has established itself as a viable business model, many operators have shifted their focus toward the next phase: boosting profitability and diversifying revenue streams.
When a flexible workspace first opens, the main source of revenue stems from membership fees and packages, as well as renting out equipment. However, many coworking spaces have realized that market demand is wide-open for them, presenting a key opportunity to grow revenue by diversifying their business branches.
At the same time, many shared workspace operators will also offer industry-specific support, particularly as more startups focus on meeting demand for connected devices. For instance, the IoT retail market is projected to exceed $11 billion by 2025. As entrepreneurs focus on bringing IoT technology to market, they will need a dedicated space for building and testing hardware.
Similarly, entrepreneurs breaking into the growing food or agritech industries will also require a space to utilize physical assets and implement product testing. In order to meet the strong shift in demand, more coworking business owners will also consequently specialize their marketing efforts to appeal to these different verticals.
Coworking is poised to continue revolutionizing commercial real estate and office space in 2020 and beyond. For those interested in entering this exciting, growing industry, franchising offers a completely turnkey business opportunity.