Americas Office. Revathi Greenwood Director, Research and Analysis, Americas Research. July 22, 2015 CBRE Research CBRE, Inc.

Transcription

1 Americas Office Revathi Greenwood Director, Research and Analysis, Americas Research 1

2 Background Figure 1. Overview of Segments Offering Flexible Supply Space Segment Target Groups Services provided Examples Executive Suites and Virtual Offices Corporations, small businesses private groups Older workers Traditional office/desk Access to business support services and satellite offices Incorporating some collaborative spaces and memberships Regus Premier Business Centers Servcorp Business Suites Coworking Centers (incl. innovation centers and accelerators) Startups, freelancers, entrepreneurs Corporations Millennials Collaborative and community driven Working, learning and social environment Participation by membership Mixture of designated, undesignated and private spaces WeWork TechSpace NextSpace UberOffices 1776 Y combinator Sources: NAIOP, CBRE Research, Q Sublet space is specifically excluded from this analysis. 2

3 Figure 2. Three Waves of Coworking Wave 1: Wave 2: Wave 3: 2012 to date Garage phase Low end space such as work/live lofts Cost plus model Basic amenities e.g., Hat factory, Jelly, Spiral Muse Legitimate work environment Larger more stable operators Focus on community, design ethos Niche focussed e.g., Blankspaces, NextSpace, Grind Professional environment Premium cost Highly branded High operational leverage e.g., WeWork, Uber Offices Source: CBRE Research, Q Market Size 2 Source: InstantOffices, Q

4 Figure 3. The Top Six Flexible Supply Markets City Flex supply market (000 sq. ft.) Footprint (% of total office stock) Coworking as % of total flex supply space Average office rents ($/sq. ft.) Regional VC funding 2014* ($ bn) New York City 3, Los Angeles / Orange County 1, Boston 1, San Francisco 1, Dallas/Ft. Worth Metro Washington, D.C *Regional data for New England, Silicon Valley, NY Metro, DC Metroplex, LA/Orange County, Dallas/Ft. Worth Metro Source: CBRE Research, Q Outlook 3 Source: AngelList, June

5 AMERICAS OFFICE Figure 4. Washington, D.C. Metro Flex Space Leasing and Overall Net Absorption Source: CBRE Research, Q Thousands Flex space sq. ft. Total Net Absorption Potential Implications for the Wider Commercial Real Estate Market Figure 5. Flexible Space: Potential Implications for Landlords and Investors Landlords Investors Overall Implications Sector is among the fastestgrowing lessee categories Aggregates growing demand from independent workers and entrepreneurs Builds pipeline for future business, incubating companies that may grow into tenants Landlords can offer more flexibility to smaller tenants by subdividing floor plates and self-operating shared workstations Buildings with access to public transport and social spaces are best positioned to cater to this segment Provides access to a high-growth market underpinned by structural shifts in the workforce, working habits and technological change Issues to Consider Credit risk of smaller operators without national footprints still an area of concern Coworking lessees may imply higher footfall and technology infrastructure usage Competing with technology investors for coworking operators, valuations are typically higher than real estate fundamentals would indicate. For instance, WeWork is valued at S10 billion while Regus is valued at $2.5-3 billion Separating the wheat from the chaff. Low barriers to entry likely to lead to shakeout and consolidation Exposure to real estate cycles and impact on ability to expand and operational leverage Source: CBRE Research, Q

6 CONTACT Director, Research and Analysis, Americas Research Client Services, Global Research, Econometric Advisors Client Services, Global Research, Econometric Advisors