Experts Say Co-working Space Won't Upend Office Sector or Threaten REITs

By John Egan

Some commercial real estate observers might be a little worked up about how office REITs might be affected by WeWork and its co-working brethren. Yet is that consternation really warranted?

To be sure, WeWork—the giant of the nascent co-working sector—is gobbling up office space at a rapid clip around the country. Recent data from research firm CoStar Portfolio Strategy LLC shows WeWork has claimed more than 12.5 million sq. ft. across the U.S., with the New York City market representing 37 percent of its nationwide footprint. An example of WeWork’s office deals: In mid-October, it signed a 138,563-sq.-ft. lease in New York City with office REIT SL Green Realty Corp.

Yet WeWork and its co-working rivals still account for a tiny slice of the U.S. office market. A February 2018 report from real estate data provider Yardi Matrix found that in 20 major markets, co-working consumed 26.9 million sq. ft. of office space—or just 1.2 percent of all office space in those markets.

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