Recent real-estate investment trends have included storage centers and residential houses for flipping. Much of this inventory, however, is gone. For the real-estate investor interested in new opportunities, the co-working industry is proving promising.
What is coworking?
Co-working is simply the practice of remote or telecommuting individuals working among one another in a common area. These workers either work for different companies or for themselves. To best serve these individual workers, co-working space provides space to work along with a variety of business and networking services, such as faxing or monthly conferencing, respectively.
Co-working space targets business owners, business professionals, and startup businesses looking for affordable work environments without the requirements involved in traditional offices. It eliminates isolation and helps professionals network and be productive in their careers or entrepreneurial industries.
How is this different than investing in commercial real estate?
The actual investment, of course, in commercial real estate is the same. The difference involves branding the real estate and re-purposing it for co-working purposes.
The building must be suitable for open co-working spaces that allow multiple individuals the opportunity to work among others while preserving relative privacy. For more established workers or businesses, the building should also have a variety of actual office spaces. Finally, the building must be large enough to provide an acceptable return on investment (ROI). For the best ROI, a balance must be struck between the number of available workspaces, the market price for co-working space, and required an annual profit rate.
In 2014, roughly 4,000,000 workers telecommuted. By 2017, this number has increased to an estimated 8,000,000. By 2022, the practice of remote working is projected to involve 50 percent of all workers. Such increases in solitary work environments will continue to drive the need for co-working spaces.
Some of the cities that are becoming co-working meccas include Boulder, CO, Austin, TX, Seattle, WA, Kansas City, MO, and Provo UT. Any city with a strong culture for supporting entrepreneurs and startups will hold obvious opportunities for co-working investments.
When it comes to ROI, the profit potential of commercial property being used as co-working space is much higher than that offered by the traditional renting of commercial real estate to businesses. For instance, in a building designated for co-working, the individual footprint requirements are smaller, allowing more square footage to be rented to more people. Combined, work tables that allow multiple workers, as well as cubicles and dedicated desks that can fit comfortably in a small area, will draw a higher ROI per square foot than traditional office space.