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What is the total U.S. market size in $$ of the coworking space?
Hello! Thanks for your question about the market size for coworking space in the US. The short version is that the market size for coworking space in the US is $1.8 billion. Below you will find a deep dive of my findings.
METHODOLOGY
I first began researching the current state of coworking space in the US. The only market size number I could find was a global number of $21 billion for flexible workspace reported by Curbed, using a 21% compound growth rate. Looking at this global number and the approximate US share of 33% based on the number of global workplaces, placed at 11,100, the US market share based upon this figure would be upwards of $6.8 billion ($21 billion divided by the global total - 11,100 - multiplied by the US share of locations - 3,596). This number is high, though, compared to an IBIS World valuation of Serviced Office Leasing and the calculations I made based on the data I found in a number of coworking studies. IBIS World places the valuation of Serviced Office Leasing in the US at $2 billion in 2016, with Regus as the largest provider in the market. I did not use this number in my final calculations, although it is close to the $1.8 billion figure, because the full IBIS World report is only available for purchase and the summary speaks only of leases of furnished office space to businesses.
A number of recent studies have evaluated the growth of coworking space and coworking providers, such as a survey by Deskmag, a shared workspace leasing report by JLL, and a flexible workspace review by the Instant Group, but none provided a market size valuation for coworking space in the US. Therefore, in order to determine the market size listed above I looked at a number of factors provided in the reports on coworking in the US. The first factor was the average revenue of coworking spaces and the number of coworking spaces in the US. I next compared this number with an average yearly rate paid by members looking at average monthly memberships and desk rental rates in the US and the number of members per location. Finally, I will look at the revenue based on the square feet of coworking space leased in the US.
CALCULATIONS
MAIN CALCULATION: REVENUE BY LOCATION
In the US, coworking spaces generated an average monthly revenue of $42,100, or $505,200 per year, according to a 2016 survey by Deskmag. An Instant Group report puts the number of US coworking locations at 3,596 in 2016.
Therefore, based upon the yearly revenue for coworking spaces multiplied by the total number of spaces in the US, the market size for coworking spaces is $1.8 billion ($505,200 yearly revenue multiplied by 3,596 locations).
As noted above, the studies also examined other factors surrounding coworking spaces, such as the number of members and average rates for renting space.
SUPPORTING CALCULATION: AVERAGE MEMBER RATES BY LOCATION
The Desmag survey also found coworking spaces comprised an average of 9647 sqft, or 141 sqft per member, with an average of 110 members per location. The average workstation rental rate was reported as $687 per month across the country by the Instant Group where the average monthly membership rate for a full time membership was reported as $305 month according to the Deskmag survey. While the majority of income comes from renting desks, monthly membership plans also comprise a large share of the revenue stream for coworking spaces. Therefore, in order to get a proper estimate of the yearly rental rates for the 2 types of income, I calculated a weighted average based upon the 34% share that comprises desk rentals and the 20% share for monthly memberships.
First for this calculation, I determined the weighted average for monthly rates only looking at the average rates for desk rental and full time membership charges to be $6,547.92 a year ($687 desk rental rate x 63% ($432.81) + $305 full time monthly membership rate x 37% ($112.85) = $545.66 weighted average for monthly rates, or $6,547.92 yearly per member).
In this calculation, then, the market size for coworking spaces looking at yearly revenue based upon the rental rates for desks and memberships paid by members is $2.6 billion ($6,547.92 weighted yearly rate x 110 members x 3,596 locations = $2.6 billion).
SUPPORTING CALCULATION: REVENUE BY SQUARE FEET
Finally, I will examine revenue based on the square feet of coworking space leased in the US. The JLL research reports a total coworking rental leasing at 27 million square feet as of the first quarter of 2016.
Looking at the yearly revenue figure above and the average square feet of each location, I determined the average revenue per square feet was $52.36 ($505,200 yearly revenue / 9647 average sqft per location = $52.36 per sqft). With the approximately 27 million square feet available in the US, the market size based upon revenue by square feet is $1.4 billion.
Therefore, looking at the supporting calculations, the market size ranges from $1.4 billion on the low end to $2.6 billion on the high end. The $1.8 billion market valuation fits almost in the middle of this range ($2 billion would actually be the mean).
CONTINUED GROWTH PROJECTED
As a final note, looking at the expense side, rent for the locations is, of course, the largest expense with staffing and operating costs coming in next. The JLL study also did a sampling of shared space pricing and determined the cost for shared office space per square foot was $139, a high premium over rental costs for Class A space at $49.59 per square foot. Additionally, most of the studies and articles looking at coworking continue to predict growth of coworking spaces. Additionally, coworking providers are continuing to expand their operations. Looking at two of the largest coworking space providers, WeWork had the largest share of leasing activity in 2016, rents approximately 4.4 million square feet of space globally, and has recently been valued at $16 billion. In contrast, the largest provider of coworking space, Regus, operating 3,000 centers in 900 cities, is only valued at $4 billion.
CONCLUSION
To wrap it up, based upon my calculations, the market size for coworking spaces in the US is $1.8 billion as of 2016. This $1.8 billion market size also fits well within the rant of the other supporting calculations - from $2.6 on the high end to $1.4 billion on the low end.
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