How will the rapid emergence of Frederick’s workspace-as-a-service market impact traditional commercial office real estate?
In Part I of MacRo’s mini-series on the rapid changes coming to Frederick’s office market, we talked about the trends and the new players feeding Frederick’s blooming new submarket of commercial real estate: serviced office space and coworking.
This is no passing fad, and the capacity for growth is enormous.
The serviced office industry has grown about 10% per year on a global level, even during this lingering worldwide recession. And the coworking movement has roughly doubled in size each year since 2006.
In the United Kingdom—widely regarded as the global leader with 36% of all serviced office square footage located there—2 % of all commercial office space is serviced office space.
By comparison, the U.S. serviced office market is still in its infancy. When the U.S. market catches up to the UK, total square feet of serviced office space in the U.S. could potentially grow from 30 million sq. ft. to 240 million sq. ft. or beyond!
It doesn’t take a crystal ball to see a tremendous shift coming to the U.S. commercial office space market.
With Frederick on the verge of substantial commercial development projects near Carroll Creek and in the midst of a push to rehabilitate the Golden Mile, should developers be re-thinking plans for traditional office buildings?
I don’t think so. I see serviced office space as a compliment to the traditional office market here in Frederick, not as a competitor.
The Frederick Innovative Technology Center (FITCI) is a great example of how serviced office space can be an asset to the business community. According to their website, FITCI has incubated over 35 Frederick-based businesses that generated:
- 230 jobs
- $17.2 million in payroll
- 70,000 square feet of leased commercial space in Frederick County
- $26.5 in annual revenues
FITCI, as a business incubator, provides more business mentoring and specialized commercial space than a serviced office provider like Regus does. Yet Regus can also have a positive ripple effect on a regional business community. The ability to lease Class A office space on such flexible terms enables businesses small and large to test-drive the Frederick market without making a risky long-term financial commitment.
According to Grant Greenberg, PR and Communications Manager at Regus, “The average stay for a Regus client is 26 months. Half of the Fortune 500′s use Regus, many as a branch office to enter a new market. We have countless stories of companies who moved on to take traditional space.”
Coworking spaces like Cowork Frederick and business accelerators like the Business Factory of Frederick can have a similar impact.
According to DeskMag—an online Coworking Magazine—one in three coworking members join to establish or grow a business, and one in ten ultimately leaves their coworking space due to business expansion.
“Years ago my husband and his partner founded Microbiology International here in Frederick over a friend’s garage,” said Peggy Richman, Founder and General Manager of the Frederick Business Factory. “When I shared the initial concept of BFF with him, he said that his business would have grown so much faster if there had been a resource like a business accelerator to get them started.”
All in all, I’d say the emergence of the serviced office market in Frederick is a sign of good things to come: to the community, and to the local commercial real estate market. What do you think?
Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He is an appointed member of the Frederick County Charter Board. He also writes forTheTentacle.com.