(Photo courtesy of Rachel Haot)
With this month’s news of the abrupt closing of TechShop and the announcement that 1776NY is pausing its operations and shutting its doors until some time next year, we got to wondering: Is coworking over?
Given the frequent openings and closings of coworking spaces, it’s hard to know exactly how many of them there are in Brooklyn. It can also be hard to delineate coworking space from incubator space from makerspace. But, as best we can tell, there are about 25 bona fide, corporate coworking spaces in the borough.
Companies with multiple spaces include: Green Desk with seven, WeWork with four (and a fifth on the way), The Yard with two (and a third on the way) and Bond Collective, which has one in Gowanus and another opening soon in Bushwick.
Coworking currently represents about 1 percent of total office space in New York, according to a November report from real estate research firm Green Street Advisors, “Property Insights: The Co-working Impact.”
“There is no doubt that startups, designers, and freelancers here have more choice of where to work than ever, and the amount of existing co-working space and new capacity coming on-line is staggering,” said Micah Kotch, the managing director of Greenpoint startup accelerator Urban-X in an email last week.
But just because some spaces closed doesn’t mean the coworking boom is over, necessarily, says Croissant cofounder Nisha Garigarn. That’s just like, what happens in businesses.
“From our perspective, there isn’t any unusual activity or large amount of closings,” Garigarn wrote by email. “We see new spaces opening and old spaces closing several times a month on average, and that’s only the ones we know about. They open and close for many different reasons — aspirations for creating a certain type of community, excess real estate inventory, corporations trying something new, etc.”
Croissant is a sort ClassPass for coworking. Users can pay a monthly fee to the app and use as many working hours as their plan has in participating coworking spaces all around the city, and increasingly, all over the East Coast.
“For these two companies in particular [TechShop and 1776], I think they were trying something very aggressive, such as opening multiple large facilities quickly, so they were taking a bigger risk than most other companies out there. Therefore, I’d say the closings aren’t related to saturation. There is certainly room for more spaces, especially in neighborhoods that don’t have good coverage. I think there’s still significantly more openings than closings.”
Garigarn noted that, in addition to the WeWork, Yard and Bond Collective openings coming online soon, several other new spaces have recently opened, including 100 Bogart in Bushwick, BKLYN Commons in Bushwick, New Work Project in Williamsburg and Ignitia Offices in Crown Heights.
The number of expansions and openings puts into context the two closings. Still, up until now there seems to have been essentially only expansion with no contraction at all (save for Dumbo Startup Lab, which may still be a harbinger of consolidation to come).
Shane Barbanel, who founded coworking space CoLab-Factory, said the market for shared space isn’t at the saturation point, but maybe it is at a rational point. Another take on the closings of 1776 and TechShop was that they just weren’t good fits for the market.
“TechShop perhaps really did not do its homework,” Barbanel wrote in an email. The company’s space was located at the lower reaches of Brooklyn in the Brooklyn Army Terminal. “Their model looked as though there were some holes in it. Coworking is not for everyone, everywhere. Location is as important in a coworking space equation as it is with an apartment building. All the features and amenities do nothing for you if you’re located in Siberia.”
One of the biggest questions about coworking is what will happen in a bad economy. With owners locked into multiyear leases but their tenants locked in just monthly, some observers of the sector see a glaring asset-liability mismatch.
“It is unclear how co-working will fare in a recession,” the Green Street Advisors report noted. “‘Independents’ seem particularly vulnerable to job loss in a recession and can easily walk away from a co-working membership. … Even in these solid economic times, there is evidence that co-working fundamentals may be softening, as WeWork’s occupancy rates have reportedly been declining and the firm has increased broker commissions and free rent to attract new members.”
Still, given all that, not even the stolid Wall Street analysts concluded that coworking is by no means going away, and will in all likelihood continue to play a larger role in the commercial real estate market in the future.
“The buyer for coworking and office space in Brooklyn has choices, and they go on a mini tour of their 3 or 4 top picks, landing on one pretty quickly,” Barbanel explained. “Before there really was not the variety of sophisticated choices as there are today.”
That does seem rational.