www.marej.com
18C — November 22 - December 12, 2019 — Commercial Office Properties — M id A tlantic
Real Estate Journal
By Matthew D. Levin, SIOR, and Chris Hanafin of West, Lane & Schlager The Powers that WE: WeWork and the Future of Co-Working in Washington, DC W eWork seems to be a constant fixture in real estate news cy- ington, D.C. commercial real estate market. While these developments are newswor- with a window of opportunity to take advantage.
given the leadership shake- ups. One figure that could give new leadership pause would be the fact that, accord- ing to our figures, WeWork has an availability rate of 36% that nearly doubles the D.C. market’s already-bloat- ed availability figures. This accounts for nearly 1.3M SF in current availability across WeWork’s 16 Washington, D.C., locations. Tenants in the market need to be cognizant of the sheer supply, not only across the WeWork portfolio, but also with the combination
of emerging alternative co- working brands and tradi- tional landlords. Spaces are often now being adapted and turned into heavily- amenitized, short-term leas- ing options, including the popular ‘spec suite’ and ‘plug- and-play’ options which are often available on a shorter term basis. These spaces take the best components of coworking and combine it with the privacy and security of having a traditional lease. Once viewed as a gap in the office market, the supply of coworking options has never been more plentiful than now. Landlords will continue to compete for tenants of all sizes and these shifts will con- tinue to result in increased leverage on the tenant side. The strongest headwind WeWork faces will actual- ly come from the D.C. Of- fice market itself. There is currently a supply-demand disparity that is causing fundamental shifts in both rental prices and availability. The District’s construction pipeline continues to deliver new space to the market at an unprecedented rate, one which outpaces landlord’s ef- forts to get that space leased up. Even with demand in-line with historic D.C. averages, this shift continues to push vacancy rates upwards. The response to this has centered around concession packages, such as free rent and im- provement allowances, which can now account for up to 33% of a tenant’s total lease obligation. While moving to a shorter-term solution can seem palatable to cost-con- scious tenants, landlords are now providing concessions that will not only provide enough financial cushion to offset relocation costs, but ro- bust allowances are allowing tenants to outfit their space to their exact desires, which can include the open floorplans, interactive common areas and the latest amenities en- joyed in coworking options. This gives tenants a layout that resembles a WeWork, but with the security of a long-term lease and space that is solely theirs. Matthew D. Levin, SIOR is a principal at West, Lane & Schlager, and Chris Hanafin is a market research manager, West, Lane & Schlager.
WeWork’s expansion in the D.C. market has been sud- den and rapid, but it’s worth noting that when compared to other major metropolitan markets, the D.C. WeWork footprint is still relatively small. For instance, of the 200+ locations that WeWork has opened or plans to open, Washington, D.C., accounts for just 16 of those. It remains to be seen whether WeWork’s leasing activity will slow down or whether they will continue to expand, especially
cles, and ten- ants should b e pay i ng a t t e n t i o n . B e t w e e n l eadership s ha k e up s , a multi-bil- l i on-do l lar t a k e o v e r
thy, it’s clear that WeWork has a busi- ness strat- egy for rapid growth in the D.C. market that seems c e r t a i n t o position the
Matthew Levin Chris Hanafin
and an on-again, off-again IPO seemingly hanging in the balance, the next year will be critical for the company and it’s standing in the Wash-
company not only against existing landlords, but also an oversaturated market, all of which creates competition that should provide tenants
Industry Leaders featuring
Deadline: December 13 Publication: December 27 Special Advertising Rates for all Participating Firms! Contact Steve Kelley or your Account Rep for More Information! skelley@marejournal.com 781.740.2900 Are you a business leader, CEO, Principal, business owner, and or innovator who helps to drive the success of our economy? Then this is the issue for you! Encourage, educate and inspire our readers by submitting an interesting and unique article on what makes you an industry leader! Market study reports or byline expert articles on your area of expertise are also welcomed. Suggested topics include: Development & Construction Real Estate Law Cannabis Technology Property Management Finance Capital &Office Markets Student Housing Multifamily
Made with FlippingBook Ebook Creator