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Coworking Industry Stabilizes in Q3, Some Markets See More Than 10% Growth in Supply

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As a dynamic industry that’s constantly evolving due to the popularity of remote and hybrid work (and, consequently, the rising need for flexible work solutions), the coworking sector is worth keeping an eye on.

For this reason, researchers at CoworkingCafe reviewed the industry’s evolution in Q3 of 2023 across the top 25 U.S. markets. Specifically, they analyzed the number of coworking spaces, the square footage covered by this segment, the median prices for coworking subscriptions and the top operators leading the market.

Additionally, they also compared the data with the state of the industry in Q2 to determine the evolution of the coworking sector and the changes occurring in each of the 25 markets.

National Coworking Inventory Remains Stable, Raleigh-Durham Registers Impressive 13% Increase in Number of Spaces

As of October 2023, the national coworking supply stands at 6,172 spaces for a minor 0.15% growth from Q2. Granted, this comes after a much more impressive increase from Q1 to Q2, when the coworking inventory grew by 10% nationwide.

A graph to display coworking supply in the US.

Notably, in half of the markets analyzed, the number of coworking spaces registered slight decreases in Q3 with Manhattan seeing the most drastic (11%). At the same time, markets like Raleigh-Durham, N.C., and Phoenix logged 13% and 11% more spaces, respectively, which helped balance the scales and keep the national coworking supply on a consistent trajectory.

Meanwhile, in certain instances, the 17% decrease in WeWork’s top 25 markets can be linked to the recorded decrease in the number of coworking spaces. This is due to the operator’s portfolio thinning throughout the last few months to fall 16% nationally and drop from 217 spaces in the top markets examined to only 180 spaces.

“The WeWork reorganization is causing some short-term contraction in the overall shared space square footage number, but demand is strong enough that the total number of national locations is up,” said Peter Kolaczynski, director at CommercialEdge. “We expect some volatility in total square footage to continue as those locations find their next use.”

Virtual Offices Become More Affordable in Q3, While Rates for Open Workspaces & Dedicated Desks Stabilize

Regarding cost, the national median virtual office price in Q3 was $125, which was 12.5% less than the June figure of $143. At just $80, Washington, D.C. had the lowest median of the 25 top markets, perfectly matching its Q2 rate.

Miami was the only other market where virtual office memberships were less than $100 (at $99). For comparison, Chicago and New Jersey were the only two markets to surpass the $200 threshold, coming in at $205 and placing them significantly above the national median.

Otherwise, the national median membership costs for dedicated desks and open workspaces remained at $149 and $329, respectively, in Q3 and Q2. Nevertheless, Phoenix, Orange County, CA, and New Jersey now offer open workplaces at prices below the national median at $119 each. In contrast, Brooklyn ($277) and Manhattan ($225) had the highest prices for this kind of coworking subscription. In both instances, they were substantially more expensive than the $149 national median cost.

Furthermore, in Q3 2023, the national median price for dedicated desks remained at $329. The same two markets (Manhattan and Brooklyn) also outperformed the national median for this sort of coworking membership by hitting $529 and $455, respectively.

Despite Continuing to Lead with Most Coworking Spaces, Manhattan Registers Highest Drop in Coworking Inventory

In Q3, Manhattan logged the highest decrease in the number of coworking spaces (11%, or the equivalent of 36 spaces). However, it still maintains its leading position among the top 25 markets. While previously staying at a considerable distance from Los Angeles in this category, Manhattan’s drop and LA’s slight increase in coworking spaces (+1%) has tightened the gap between the two coastal markets. As such, LA is now behind Manhattan by only three spaces.

A graph to display coworking supply in the US.

Not to be outdone, Washington, D.C. also claimed a solid position with 251 coworking spaces, despite losing 10 in the previous three months. And, the Raleigh-Durham, NC, market — which grew from 79 coworking spaces at the end of June to 89 in October — showed an exceptional 13% growth this quarter, which was the highest among the top 25 cities.

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Similarly, Phoenix had an 11% increase in its number of coworking spaces as the inventory here increased from 104 spaces to 115 quarter-over-quarter.

Total Coworking Square Footage Decreases Most in Manhattan & New Jersey

Nationwide, the square footage of the coworking inventory declined by 2%. Of course, the closure of larger coworking spaces is one explanation for this decline in numbers, despite the fact that there were nine more spaces registered in Q3. More precisely, the overall national square footage declined from 120 million square feet in June to 117 million in October.

A graph to display coworking supply in the US.

Additionally, the decrease in the total square footage covered by coworking was most prominent among markets that lost higher numbers of coworking spaces. Namely, these declines were most pronounced in Manhattan and New Jersey, where both markets logged 11% fewer coworking square footage in Q3 than in Q2. And, while the number of coworking spaces decreased by the same percentage in Manhattan, in New Jersey, it fell by only 6% (nine spaces).

This indicates the closure of bigger coworking spaces across the market, along with the reduction in square footage. Similar to other cities, Indianapolis and Washington, D.C. also saw significant drops in their coworking square footage of 6% and 8%, respectively.

Conversely, Phoenix saw an impressive 8% growth in its total square footage covered by flex workspaces in the last quarter due to the opening of nine additional coworking spaces. Likewise, San Francisco — another city with impressive growth in this area — saw a 7% increase in the amount of square footage occupied by coworking spaces in the third quarter of 2023. As a result, the market’s allotted square footage hit 3 million, which was up from 2.9 million in June.

Average Square Footage per Market Decreases, but Coworking Spaces in Brooklyn Cover More Ground

Although Manhattan had the most notable decline in coworking spaces, it also experienced a 0.3% increase in average square footage in Q3. This put the market for flexible workplaces at more than 47,500 square feet (more than double the national average of 19,000 square feet).

In addition, in Q3, Brooklyn surpassed San Francisco (the previous runner-up) to gain ground on Manhattan with more than 29,000 square feet of coworking space. This represents the largest increase among the top 25 areas and a 5% improvement from Q2.

A graph to display coworking supply in the US.

Next, Chicago and Washington, D.C. continued to occupy the fourth and fifth spots, respectively, in spite of 2% and 4% declines in square footage. Then, with 15,900 square feet, New Jersey was another market to experience a 5% decrease in the total area occupied by coworking spaces to rank last among the 25 markets.

It’s also worth noting here that Raleigh-Durham witnessed a 6% decline in average square footage in Q3, even though it saw the most growth in the number of coworking spaces. Despite this, the market’s average square footage totaled more than 21,000, which was still above the national median.

WeWork Continues to Decrease Its Footprint While Industrious & Spaces Add More Locations

With more than 70% of their portfolios located in the top 25 markets, industry leaders Regus, WeWork, Industrious, Spaces and Premier Workspace continued to be the top operators with the greatest numbers of coworking spaces nationwide.

A graph to display coworking supply in the US.

In particular, in the third quarter of 2023, Industrious increased its market share in four of the 25 markets that were analyzed — a 3% rise from the previous quarter. However, Spaces was even more outstanding: With a 4% growth, the coworking operator added new sites to its portfolio, thereby covering the biggest markets.

On the other hand, Regus witnessed a small 3% decline among the top 25 marketplaces. Premier Workspaces had a decrease of 1%, as well. But, during the last three months, industry leader WeWork lost the most ground: In Q3 compared to Q2, the operator closed 16% of its nationwide inventory and had 17% fewer coworking spaces in the top 25 markets.

To examine the full methodology behind this report, go to CoworkingCafe’s website.

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Coworking Insights is the go-to source for trends, data, advice and insights for coworking industry professionals.

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