The coworking industry was the fastest-growing sector in Washington D.C.’s office market just two years ago.
However, the pandemic has halted this growth and forced operators to give back hundreds of thousands square feet of space.
“Coworking was really the only sector that was new and was driving positive growth for the city up until this year,” said Michael Hartnett, JLL Senior Research Director. “None of these sectors that are D.C.’s homegrown sectors are in growth mode outside of a bit of tech.”
WeWork closed three of its oldest locations in October and announced four additional closures last month.
Additionally, D.C.-based coworking firm MakeOffices shut down last month, but is aiming to find another operator to take over its nine locations across the market.
According to CBRE, occupancy of flexible offices fell by 879,000 square feet in the six months ending on January 31. This was around an 18% decrease of their previous footprint.
The pandemic has poked gaping holes in the typical coworking business model of taking out long-term leases, then subleasing out on a short-term basis.
Along with WeWork’s closures, IWG filed for bankruptcy for numerous entities across the country last year, including at least two D.C. locations. This move was intended to offer some wiggle room while the company restructured its leases.
This tumultuous time for the industry has forced operators to rethink their strategies, with some looking towards adopting management agreements with landlords and offering “spoke” workspaces in secondary and suburban cities.
