Flex Frontier: Coworking’s Next Big Markets

In February, coworking colossus WeWork opened what the company described as its largest location in the Southeastern United States: a more than 130,000-square-foot location over seven floors at 128 South Tryon Street in downtown Charlotte, N.C.

The space — which includes 45 conference rooms, more than 200 offices, eight common areas, and seven kitchens for up to 2,500 members — followed WeWork’s initial mid-2017 foray into North Carolina: an approximately 50,000-square-foot lease in another downtown Charlotte building, a footprint that nearly doubled before that year was out. And WeWork opened its third downtown Charlotte location just this summer, and now has three locations in the Raleigh-Durham area.

The openings underscore a major trend in coworking: Not its expansion into markets beyond the San Francisco-New York fulcrum that many operators such as WeWork rode to prominence — that’s been going on for a couple of years now at least — but rather coworking and flexible office space’s potential in these secondary markets. Because WeWork is hardly alone in looking beyond its coastal origins.

A CBRE analysis released in May and covering 30 markets nationwide found that half have more than 1 million square feet of flexible-office inventory. The rest? The sky’s the limit, according to the analysis, which read, “Many U.S. markets have not even scratched the surface of this sector, including high office-using employment growth markets like Nashville, Austin and Charlotte.” 

As they do scratch the surface, analysts say that these secondary and tertiary markets could end up illuminating much more about the future of coworking than the next WeWork or Regus lease in the Bay Area or Manhattan. They’ve already proven the sector’s past and present appeal. 

“I think the bottom line is that the concept is not going away,” Bethany Schneider, director of research at Newmark Knight Frank, said. “It’s really changed the landscape in a way that’s not going to be undone at this point.”

A network and density

In fall 2018, a business catering company called ezCater leased 100,000 square feet on four floors at 40 Water Street in downtown Boston following a fundraising round that netted $100 million toward expansion. 

Only months before, WeWork announced plans to take that space from developer Related Beal and operate it as the company’s largest Boston outpost. Enter ezCater, which had room for up to 750 employees at 40 Water. The company’s chief executive reportedly said they liked the more flexible terms WeWork could offer compared with conventional landlords. (WeWork declined to comment for this article.)