A co-working space is an arrangement wherein people from different organizations, fields and professional backgrounds work in a shared office space designed to promote collaboration. It is cost efficient and convenient, because various independent contractors, freelancers and entrepreneurs can share facilities and infrastructure. Small businesses can rent out meeting rooms and office spaces in the short term.
Co-working industry in the USA
A survey by the Pew Research Centre found that in 2023, 41% of people who had jobs that could be done remotely, were working in a hybrid mode, i.e. remote work on some days of the week, and on site work on others. In light of increased demand for remote and hybrid work arrangements, the co-working industry is growing exponentially in the United States.
In this blog post, we will look at the current market dynamics and insights into the co-working industry in the US.
What does the national co-working industry look like in 2023?
One way of measuring the growth of the co-working industry is to look at the national co-working inventory, which refers to a database of all the co-working spaces in a specific region. As of August 2023, a quarterly report released by Co-working Insights showed a 10% growth in the number of co-working spaces, in the previous 3 months.
Toward the end of June 2023, there were 6,163 registered co-working spaces in the USA, with New York, Los Angeles and Washington DC in the lead. The report also highlighted an overall growth in terms of location count and square footage occupied by co-working spaces.
A more recent quarterly report by Co-working Cafe, published in October 2023, reported a 10% growth compared to the previous quarter, with a total location count of 6,172 co-working spaces. While some top markets reported a decline in number of co-working spaces, newer locations like Phoenix made up for it by reported 11-13% growth compared to the previous quarter.
Factors contributing to the expansion of the co-working industry in the USA
Flexible Work Trends
The shift towards flexible work arrangements, including remote/hybrid work and freelancing, has been a significant driver of growth in the co-working industry. Without the issue of long term lease commitments, co-working spaces become an attractive option for individuals and businesses who want to access office facilities on a short-term basis. Such an arrangement is especially enticing for people who are looking for office space for just a few days or weeks.
Entrepreneurship and Startups
In 2021, the Global Entrepreneurship Monitor found in a survey, that roughly 52% of their respondents saw the pandemic as an opportunity to start and promote their own business. The USA has a vibrant entrepreneurial ecosystem with a growing number of startups and small businesses. Co-working spaces provide cost-effective solutions for these entities, offering a professional working environment without the financial burden of a traditional office.
Technology Advancements
A report published by McKinsey in 2022 mentioned advanced connectivity as one of the many important trends leading technological advancement in the US. The report highlighted an investment of $118 billion in this industry, thanks to wireless low power networks, cellular and orbit satellites, and other digital advancements that boost productivity.
Advances in technology, particularly in terms of connectivity and collaboration tools, have facilitated remote work and made it easier for individuals to work from various locations. Co-working spaces leverage these technologies to create productive and collaborative work environments.
Corporate Adoption
Larger corporations are increasingly recognizing the benefits of co-working spaces for certain teams or projects. Some companies use co-working spaces as satellite offices, enabling employees to work in different locations or reducing the need for extensive office space.
Networking Opportunities
Co-working spaces often provide networking events, workshops, and community-building activities. This sense of community and collaboration attracts individuals who value networking and knowledge-sharing.
Urbanization and Accessibility
Urbanization is a global trend, and the US population seems to be strongly moving with it. The Centre for Sustainable Systems at the University of Michigan estimated that by 2050, 89% of the US population, and 68% of the world population will be living in cities.
With the ongoing trend of urbanization, many co-working spaces are strategically located in city centers or easily accessible areas. This makes them convenient for professionals who want proximity to business districts and public transportation.
How does recession impact the co-working industry?
When an economy slows for two consecutive quarters, we call it a recession. In the first 6 months of 2022, the USA economy showed a slight decline; the GDP sank by 1.6% in the first three months, and then by 0.6% in the next quarter. But then in the third quarter, we saw an annual growth rate of 5.2%. Long story short, there have been some ups and downs in the US economy in 2023, but we are technically not in a recession.
Still, we could look at how recession could hypothetically impact the co-working industry. Recession typically affects an industry through reduced consumer spending, financial investments, employment, and global trade, and increasing prices.
However, a 2022 article by Worq discussed the benefits of shifting from traditional office spaces to co-working spaces, in the event of a recession. It highlights how the demand for co-working spaces shot up during the COVID pandemic, due to flexibility, less commute, reduced costs, and convenience.
Owners of co-working spaces can take steps to prepare for a possible recession. Investment in good infrastructure and updated technology, strong marketing, and a robust network of suppliers and partners are some strategies that will help entrepreneurs stay afloat in the face of recession.
GIPHY App Key not set. Please check settings