Coworking space in San Diego County has increased by 25 percent in a year and industry analysts are confident it will be a growing part of the region’s office supply.
There was 1.5 million square feet of coworking office space in the county at the start of June, up from 1.2 million square feet at the same time last year, said a new report from real estate services company Cushman & Wakefield.
Coworking, an industry term for individual office space popularized by companies like WeWork, still makes up a relatively small part of the office market — just 1.9 percent of the 80 million square feet of office space in San Diego County. But, analysts still see the growth as a sign the phenomenon will continue to grow, even if it is more of a slow and steady climb.
Jolanta Campion, a research director at Cushman & Wakefield and author of the report, said the coworking industry has been successful in creating a format that appeals to millennial workers, which are the biggest working generation.
“Coworking is simply responding a lot faster than typical landlords,” she said.
Campion said coworking is not just about espresso machines and cool amenities, but a startup culture that shies away from traditional five- to 10-year leases.
She said the thing that is holding back the industry is a concern among landlords that allocating more than 25 to 30 percent of a building to coworking is too risky. It can also be stressful for landlords that must deal with frequent turnover.
Campion said there is still some question in the industry if the coworking concept will continue to grow in the United States. But, she said a promising sign is continued buildup in Europe and China.
The majority of coworking space is downtown with 21 percent. Other hotspots are Carlsbad (14 percent), University Center (9 percent) and Miramar (7 percent). The rest is spread throughout the county.
The pace at which new coworking spaces open seems to have slowed. About 300,000 square feet of coworking space opened in 2016 with an additional 300,000 in 2017. But in 2018, the square footage dropped to 129,000.
Alan Nevin, a real estate analyst at Xpera Group, said the ability for businesses to avoid long-term leases will continue to be appealing. He said he knew of a business that just kept renting more and more coworking space. While the business eventually grew big enough for a traditional lease, coworking space was a cost savings in the beginning.
Belgium company Regus has the most coworking space in San Diego County with 288,300 square feet across 18 locations. It is in several of downtown’s more high-profile office buildings, including the Emerald Plaza at 402 West Broadway and DiamondView at 350 10th Ave. It also has space at Liberty Station, several office buildings in Mission Valley and the La Jolla Center building in University Center.
Regus’ office renting business has been around since 1989, well before WeWork showed up with hip office space aimed at millennials. Regus’ office space tends to be more traditional, minus the open-floor plans and amenities some WeWork offices offer, but it is playing catch-up. Its parent company IWG purchased Dutch company Spaces in 2015, which is similar to the open floor space of WeWork, and has expanded the Spaces brand in many markets.
WeWork has 140,600 square feet across two buildings: The Aventine building in University Center and 600 B St. in downtown San Diego, the same building as The San Diego Union-Tribune. Its downtown location is one of the biggest spaces for coworking with 88,000 square feet. The New York-based company has shown an appetite for growth, signing a lease this month for an entire building in Boston, reported the Boston Globe.
WeWork has a valuation of nearly $50 billion, said The Wall Street Journal, and is expected to go public this year. The Journal reported it lost nearly $2 billion in 2019 in an effort to rapidly expand.
There are also other coworking players in town. Premier Workspaces, based in Irvine, has 152,100 square feet across nine locations. Some of its locations include space in San Diego’s tallest building One America Plaza and an office building in Rancho Bernardo. The biggest coworking space, at more than 100,000 square feet, is from Boxer Workstyle at 7220 Trade St. in the Miramar submarket. It is the Texas-based company’s only location in San Diego County.
Prices for coworking space vary on services and location. The monthly average cost to use a coworking space is more than $200. Prices go up from there for a dedicated desk, around $400 a month, and a private office, $800 a month and up.