A report from real estate brokerage Cushman & Wakefield revealed that Chicago land is becoming more difficult to snag among firms such as WeWork and Spaces.
Most of these companies have a noncompete agreement with landlords, preventing rivals from setting up shop within the same building. Therefore, any coworking firm that takes up two floors of a 30-story building actually takes the entire tower off the market and controls 18 times the amount of space they lease.
Now, 45 out of the 86 analyzed Class A downtown office buildings have a coworking operator with a noncompete clause or take up enough space that keep out rivals, leaving only 22 Class A downtown buildings up for grabs. The report said that number could fall even more if coworking leases continue in the area.
At this rate, coworking numbers will likely slow as demand continues to stay constant. Still, some landlords are skeptical of how coworking will fare as the country faces economic uncertainty.
Subsequently, these common noncompete clauses could cause coworking’s rampant expansion to come to a screeching halt, leaving coworking firms to either acquire competitors, look for lower-quality buildings, or move elsewhere.
“The message to national coworking providers trying to get into every (major) city is you better engage the market now and plant your flag, or you’re going to miss out,” said Cushman & Wakefield tenant broker Matt Hoffer.