Washington D.C. is a huge player in the coworking space market. As the industry continues to expand, how will rent costs be affected?
Investment management company JLL shows that D.C.’s K Street coworking spaces cost $60.75 per square foot, compared to Northern Virginia where the average is $34.15 per square foot.
The Commonwealth of Virginia has committed a $195 million investment in neighborhood infrastructure improvements. Amazon will pay $35 per square foot in rent for its new headquarters— about $2 below the average in Arlington County.
An SEC filing shows that Amazon’s leases in the last five quarters averaged at $34.20 per square foot, and JBG Smith plans to invest $15 million to prep for the new Amazon headquarters. Amazon is also investing $294 million to purchase JBG Smith’s PenPlace.
In the same SEC filing, JBG Smith outlined how Amazon’s presence will impact the area. The second headquarters will accommodate somewhere between 25,000 and 38,000 jobs, as well as drive demand for commercial and residential space. The new space is located in National Landing, a walkable neighborhood in Northern Virginia that encircles Crystal City.
“We believe the real estate fundamentals in National Landing will surpass other close-in Northern Virginia submarkets and approach convergence with Washington, D.C.,” the real estate company said.
JBG Smith owns 6.2 million square feet of office space, 2,850 multifamily units, and 7.4 million square feet of development in the area. The company plans on investing in more properties in correlation to Amazon’s new headquarters.
Tom Fuge, Regional Senior VP at Truss, says that Amazon’s second headquarters shouldn’t affect the price of creative office spaces in the area. Truss is a commercial real estate marketplace that helps businesses find and lease spaces.
Fuge says that K Street’s cost per square foot of office space is $55, which is more expensive than Crystal City and that Amazon’s headquarters announcement has already impacted Arlington’s real estate market.
“With Amazon announcing their HQ decisions, we’ve seen an increase in cost per square foot, and the amount of available spaces has gone down by close to 25 percent,” Fuge said. “Following Amazon’s announcement, the average cost per square foot went from $34.52 to $35.50.”
Nevertheless, demand for coworking offices in the area could affect rental prices even more than Amazon’s new headquarters. Fuge says that consumers need flexibility in the workplace and coworking is no longer a trend, it is a lifestyle.