With offices closed, WeWork and other coworking spaces jump on market opportunity
With no end in sight to her work-from-home arrangement, Sarah Crabbe desperately wanted to find an alternative office space outside her packed New York City apartment.
“I love my apartment, but it is 900 square feet. It comes with a husband, an almost 4-year-old son, and a nanny,” Crabbe, a vice president of advertising sales at Discovery, told Fortune. “And we have done it for a very long time.”
When it became clear that the Discovery office wouldn’t be opening until at least 2021, Crabbe turned to WeWork. In September, she purchased the coworking giant’s All Access membership plan, an offering that was born during the pandemic, for $299 a month.
“I wanted to figure out how I could have the flexibility to even go someplace for a few hours to see different surroundings, have privacy, and get that energy from being in an office,” Crabbe said. “I am someone who thrives on that. Even if I don’t know the other people sitting near me, you still feel that energy.”
WeWork, which weathered financial troubles last year and sold off all noncore assets, is now enjoying a resurgence during the coronavirus pandemic owing to increased demand from workers who are fed up with working from home and are unsure if or when their offices will reopen. In addition to the All Access option, WeWork also launched a pay-as-you-go option in New York City with plans to expand in other markets. For $29 per day, anyone can reserve a desk at WeWork. Meeting rooms can also be booked for $10 an hour. Each coworking space includes precautions, such as social distancing, plenty of hand sanitizer, and a requirement to wear masks when visitors get up from their desks.
“We think this is what the future of work looks like. In a given week or month, an employee may work at corporate headquarters, a satellite office, a third place, and at home. They won’t just be in headquarters all the time. That seems clear,” said John Lewis, vice president at WeWork enterprise sales.
WeWork is already seeing a surge of interest. A company spokesperson said the company sold 13 times as many All Access passes in September as it did the previous month. There have also been four times as many single-day desk bookings from members during the pandemic, reinforcing the desire for a flexible work environment.
“I think it is an interesting business model, and as long as there is uncertainty about the future and what it looks like, I think you will see some people looking to this as an option,” Victor Calanog, chief commercial real estate economist at Moody’s Analytics, told Fortune.
While individual employees like Crabbe are paying out of pocket for an office that isn’t at home, some companies are also opting to give up their leases in favor of a flexible model in a coworking space.
When Anna Crowe, founder of Crowe PR, ended her company’s San Diego office lease in May, she said she wasn’t sure where or when her team of 16 people would be getting back together again to work in person.
After doing some socially distant team outings in July, she decided to sign an agreement at Moniker Commons, a coworking space near the beach in San Diego, for three months. The Crowe PR space only fits nine people comfortably at a time, which means not everyone can go into the office on any given day.
“We’re able to collaborate and meet with a few clients safely in person, receive and ship products from a central location, and experience some form of normalcy outside the office,” Crowe told Fortune.
She said that half of her employees are using the space two to three times a week, while others come in once a week or choose to work remotely Monday through Friday.
“If we learned one thing this year is that circumstances can change overnight, and, as businesses, we must adjust quickly, both on revenue and the expense side,” Crowe said. “I was looking for a flexible lease option so that our employees could have a choice of working remote or in the office without major financial implications.”
While Crowe signed the lease for a three-month trial, she said she thinks she will keep it next year since it provides her employees with an option while also “being mindful of the bottom line.”
Office vacancies are up, however it’s unclear what the long-term impact could be. Gross leasing volume dropped 53.4% in the second quarter of this year, according to data from JLL. That amounts to 14 million square feet in office space losses, the steepest decline since 2009, according to the report.
Calanog, of Moody’s Analytics, said there has been an overall “40-year trend” of offices using less space per employee. However, he said, “we’re all in the middle of figuring it out” when it comes to what long-term effect the coronavirus pandemic will have on commercial real estate. For now, he said, it’s a clear win for WeWork and other coworking spaces.
“The market opportunity is there will be an overshoot,” he said. “People will give up office space because they want to save money, and then they will realize they still need some sort of flexible workplace.”
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