After the cull: will coworking bounce back in North America?
Coworking operators in North America are still reporting low occupancy rates and cheaper pricing – but new data from Upsuite suggests a recovery is gathering pace in the sector
Things looked bleak for coworking operators in North America during the global pandemic as members moved out and a fifth of all locations were lost. But, according to new data from flexible workspace provider Upsuite, a recovery of sorts is now underway.
According to Upsuite’s analysis, the pandemic exposed the vulnerabilities of traditional coworking models and presented new opportunities to rethink. Flexible strategies are now taking effect as organisations respond to the rise of hybrid working. As a result, demand per location in North America grew by 41 per cent from Q1 to Q2 in 2021.
Further, demand per location is now nearly 10 per cent higher than pre-pandemic levels in Q1 2020. Core cities have experienced above-average demand growth, including New York City, Los Angeles and Denver.
Not in the clear just yet
However, despite the definitive interest and appetite to return to coworking spaces, coworking providers are not in the clear just yet. Upsuite’s data has found that vacancy rates are still too high to maintain a positive cash flow. In Denver, vacancy rates are around 30 per cent and many coworking operators report that occupancy of 70-80 per cent is essential to make a profit.
At the same time vacancy is high, average pricing has fallen. In markets like Washington DC, average price per seat fell from a pre-pandemic high of US $422 per seat per month to just above US $280 per seat per month.
What’s next for coworking?
The current data on the North American coworking market is mixed. On the one hand, flexible working is clearing fuelling demand in the sector, but the economic uncertainty associated with a prolonged pandemic is preventing spaces from being fully occupied.
Based on current data, Upsuite predicts that the demand for coworking and flexible offices will rise again by 20 to 30 per cent as organisations continue into recovery. This demand will be driven primarily by companies’ need for flexibility – already organisations are asking for shorter and more flexible leases going forward.
Among the 100 companies per week that Upsuite works with, it reports that few are plotting a strategy for a five-day office schedule. The expectation now is that the average company will plan a two or three-day work week in the office and expand co-working provision.