COWORKING A N D S E R V I C E D O F F I C E

RALEIGH/DURHAM

MARKET REPORT

Q1 2019

photo credit: SPACES at The Dillon

What’s Next in the Evolving World of Flexible Office Space

The demand for flexible workplace solutions has been surging in the U.S. and worldwide, resulting in providers adding millions of square feet of coworking space in 2018, an increase of more than 30% since 2017. In response, investors are pouring billions of dollars into coworking, while landlords are opening up collaborative spaces and provisioning their own flexible office solutions. Industry stakeholders are examining their approach not only to this emerging sector, but also to incorporating resiliency in real estate in general. The current report by Cushman & Wakefield (C&W) sees very few providers who are currently achieving

success in the sector with only a coworking model. Instead, the trend is toward hybrid solutions where operators supply not only open plan coworking space, but also fully demised private suites that can be customized and branded, known as managed and serviced offices (MSO). The average term is 12 months, a short as month-to-month, and as long as five years.

A number of factors drive this demand. For start-ups and small to medium sized enterprises (SMEs), the mitigated risk, avoidance of capital expense, and especially the short-term commitment are enticing. Entrepreneurs can allocate money, time, and resources to growing their business and not managing real estate. Moreover, not only do contingent workers (freelancers, independent contractors, consultants, or other outsourced and non-permanent workers) make up a larger share of the growing labor force, millennials find the coworking model compelling - they want to be located in urban areas and work in innovative workplaces that inspire them. Hence, larger established companies are now seeing opportunities in coworking facilities to retain and attract young talent. Many corporations are examining their workplace models in a bid to encourage creativity by providing a more unstructured and less centrally controlled environment than their traditional offices. They are also seeing value in the scalability that is intrinsic with flexible workplace solutions. Particularly when occupiers are growing or downsizing, a workplace strategy that includes some flexibility can make business and financial sense.

Going forward, coworking and MSO in real estate portfolio strategies will likely continue to gain traction. We all know that cost containment remains the primary focus for occupiers during periods of volatility and rising rents. Given this, more companies will embrace flexible workplace as a solution set. This has already been the trend in industries such as life science, financial services and insurance, and especially technology, which are all major drivers of office activity in the Raleigh-Durham market.

THE EVOLVING WORLD OFFLEXIBLE OFFICE SPACE

30%INCREASE IN

COWORKING AND MSO INVENTORY

IN 2018

photo credit: Industrious at Charter Square

Jen Dittmer VivoloDirector, Global Flexible Workplace Solutions

GLOBAL & U.S. FLEXIBLE OFFICE LANDSCAPE

1.5+ MILLION COWORKING MEMBERS WORLDWIDE

675X MOREGLOBAL COWORKING SPACE TODAY THAN IN 2008

50+ MSFTOTAL U.S. COWORKING SQUARE FEET

OVER THE NEXT DECADE, FLEXIBLEWORKSPACE WITHIN CORPORATE REAL

ESTATE PORTFOLIOS WILL GROW

5-10% (CURRENTLY 1%)

E ST I M AT E S P R E D I C T T H E R E A R E N OW C LO S E TO

SHARED WORKSPACE LOCATIONS WORLDWIDE

30,000

OF THE U.S. WORKFORCE NOW COMPRISES CONTINGENT WORKERS

40%

Going Corporate

Becoming a staple for

developers

A breeding ground for in-house

innovation hubs

Booming in Asia Pacific

Rapidly growing within all U.S.

metropolitan areas

Gaining momentum

through M&A

Cost arbitrage will not slowdown the momentum in emerging markets

GLOBAL COWORKING TRENDS

5%FLEXIBLE OFFICE NOW MAKES UP

APPROXIMATELY

OF ALL CLASS A OFFICE INVENTORY IN THE U.S.

Downtown Raleigh Downtown Durham

North Raleigh

RDU/RTP

CaryChapel Hill

SUBMARKET SHARE OF COWORKING SPACE

LARGEST OCCUPIERS OF NEW LEASES 2016-PRESENTNEW LEASES

LARGEST COWORKING OFFICES BY SQUARE FEET

WeWork

Regus

Spaces

Industrious

Spaces

Regus

Regus

Regus

Regus

Regus

HQ Raleigh

Regus

Regus

Amer Undgnd

HQ Raleigh

Local

National

International

COMPANY SIZE

MAJOR COWORKING PROVIDERS

23+24+33+5+15+H WeWork Spaces*

Industrious

Other

Regus*

RALEIGH/DURHAM FLEXIBLE OFFICE LANDSCAPE

23%

24%33%57%*

5%

15%

Source: Cushman & Wakefield Research

76,000

54,376

34,290

31,304

26,354

24,203

19,507

19,000

17,937

17,832

15,375

15,350

15,000

14,710

*part of IWG

ONE CITY CENTER

MERIDIAN PARKWAY

THE DILLON

STATION AT EAST 54

BRISTOL PLACE

EAST 54

34,141CHARTER SQUARE

3737 GLENWOOD AVE

REGENCY PARK

CENTREGREEN V

CAPITAL CLUB

BOA TOWER

FORUM I

TRUST BUILDING

311 S HARRINGTON

Coworking locations are well distributed throughout the Triangle, but the largest representation is in the downtown Raleigh market with 29% of the market’s share.

200,198 sf

143,619 sf

80,730 sf 73,237 sf55,507 sf

131,013 sf

SAS 419,994 sf

Syneos Health258,250 sf

Lab Corp221,988 sf

IWG (Regus/ SPACES)187,691 sf

Teleflex163,568 sf

MetLife219,002 sf

Relias Learning184,378 sf

WeWork156,000 sf

Allscripts234,470 sf

Duk

e U

nive

rsit

y30

2,0

15 s

f

Source: Cushman & Wakefield Research

BELOW THE NATIONAL AVERAGE

~2/3 OF ALL CURRENT COWORKING SF HAS COME INTO EXISTENCE

SINCE 2016

RALEIGH/DURHAM

39%

60%

RALEIGH/DURHAM AVERAGE MONTHLY COSTSM

AR

KE

T C

OM

PAR

ISO

NA

vera

ge

Cla

ss A

Ren

tal R

ate

$82.91

$79.27

$61.47

$41.94

$39.36

$33.16

$43.96

$31.89

$30.31

$30.01

$29.74

$27.00

$22.46

New York (Midtown)

San Francisco

Washington D.C.

Miami

Boston

Seattle

Chicago

Denver

Atlanta

Dallas / Fort Worth

Nashville

Raleigh/Durham

St. Louis

$250Virtual Office

Use of an address and access to

business functions, such as phone answering and

conference room rental, without

physically occupying the space.

TO SPEC*

Managed Space

Similar to direct space, a branded, turnkey,

and customized workplace solution

leased and managed by a third-party from buildout to ongoing daily management.

$575*

Serviced Office

Exclusive access to defined and secure office(s)

or demised suite, often with 24/7

keyed access and some signage such as lobby directory.

$300Membership

Touchdown desk on fixed monthly

or annual fee, includes the cost

of desk space, access to pay-per-use services and

networking events.

$350Coworking

Access to a desk in a shared area,

but not dedicated. Availability is

not guaranteed. Resources and

services are pooled, both for efficiency and to encourage

collaboration.

$450Dedicated Desk

An assigned desk in a shared area but is often located in close proximity to

the coworking space. Includes lockable filing

cabinet or locker.

S H A R E D P R I V A T E

*per person, in 2-person, 120 sf window office,

12 month term

*solution for 10+ people and commitment term of 12 months

or longer

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LAKE CRABTREE

LAKE JOHNSON

PARKERS CREEK

WILLIAMB UMSTEADSTATE PARK

FALLS LAKESTATE

REC AREA

LAKE CRABTREECOUNTY PARK

SEAFORTHPOPLARPOINT

CROSSWINDS

WHITE OAK

APEX COMMUNITY PARK

FRED G BONDMETRO PARK

REGENCY PARK

LAKE JOHNSON PARK WALNUT CREEKPARK NORTH

CARL ALWIN SCHENCKMEMORIAL FP

SHELLEYSERTOMA PARK

BLUE JAYPOINT

COUNTY PARK

OLD CHATHAMGOLF CLUB

PRESTONWOODCOUNTRY CLUB

UNIVERSITY OFNORTH CAROLINA

DUKEUNIVERSITY

NORTHCAROLINA STATE

UNIVERSITY

MEREDITHCOLLEGENC ST

COLLOF VETERINARIAN MED

1

2

3

4

5

7

8

9

10

6

1112

14

15

16

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18

19

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25

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27

28

13

RALEIGH-DURHAMINTERNATIONALAIRPORT

´

0 52.5Miles

# Company Name SF Occupied Opening Date

1 WeWork 81,032 5/1/19

2 WeWork 76,000

3 Regus 54,376

4 Spaces 52,619 4/13/20

5 Spaces 34,290

Industrious 34,141

6 Spaces 32,000 12/16/19

7 Spaces 31,304

8 Regus 26,354

9 Regus 24,203

11 Regus 20,000 4/1/19

12 Regus 19,507

13 Regus 19,000

14 Regus 17,937

# Company Name SF Occupied

15 HQ Raleigh 17,832

16 Regus 15,375

17 Regus 15,350

18 American Underground 15,000

19 HQ Raleigh 14,710

20 Regus 14,288

21 CrossRoads Business Center 11,300

22 Access 10,200

23 Regus 9,010

24 American Underground 8,842

25 Regus 6,903

26 Office Evolution 6,441

27 Office Evolution 5,000

28 Intelligent Office 2,000

LOCATIONS 1 15

2 16

3 17

4 18

5 19

6 20

7 21

8 22

9 23

10 24

11 25

12 26

13 27

14 28

WeWork Spaces

Industrious

Other

Regus

TO LEARN MORE ABOUT COWORKING AND THE RALEIGH/DURHAM OFFICE MARKET, PLEASE CONTACT:

Copyright © 2019 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple

sources considered to be reliable. The information may contain errors or omissions and is presented

without any warranty or representations as to its accuracy.

JEN DITTMER VIVOLO

Director, Global Flexible Workplace Solutions

+1 919 645 3591

jennifer.vivolo@cushwake.com

JOSHUA CHILES

Research Analyst

+1 919 645 3590

josh.chiles@cushwake.com

photo credit: WeWork at One City Center

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